I doubt that's how the password is used for. More like they copy all contents of the phone and ask the password to go through encryption. The data is already there, accounts don't matter.
This is also the reason why it's no good to have a dead man's switch or the like, as in a certain password just wipes everything. You'd just get arrested for destroying evidence and they continue from a copy.
I always did this. I let my friends play and I watched. Dunno why really. I still find it extremely hard to play single player games (or solo multiplayer), I just get bored. I need to either watch or play with a friend.