2310060 - PREP_PRE_CHECK/PROFREAD: ERROR: "OS user password does not work, please reenter: System error: Logon failure: unknown user name or bad password."

While performing an upgrade using Software Update Manager tool, phase 'PREP_PRE_CHECK/PROFREAD'  fails with following error in PROFREAD.LOG:
1 ETQ201 Entering upgrade-phase "PREP_PRE_CHECK/PROFREAD" ("20160405110427")

2 ETQ367 Connect variables are set for standard instance access
4 ETQ399 System-nr = '<instance number>', GwService = 'sapgw<instance number>' Client = '000'
1 ETQ200 Executing actual phase 'PREP_PRE_CHECK/PROFREAD'.
1 ETQ399 Phase arguments:
2 ETQ399 Arg[0] = ''
4 ETQ399 Starting dialog 'Passwords' at 20160405110427.
1 ETQ359 RFC Login to: System="XXX", AsHost="hostname" Nr="<instance number>", Client="000", GwHost="gwhostname", GwService="sapgw<instance number>"
2 ETQ232 RFC Login succeeded
4 ETQ010 Date & Time: 20160405110455 
1 ETQ233 Calling function module "RFCPING" by RFC
1 ETQ234 Call of function module "RFCPING" by RFC succeeded
4 ETQ010 Date & Time: 20160405110455 
4EETQ399 Dialogue validator 'OSValidator' failed with 'OS user password does not work, please reenter: System error: Logon failure: unknown user name or bad password.

• Windows

PREP_PRE_CHECK/PROFREAD, OSValidator, password , KBA , BC-UPG-TLS-TLA , Upgrade tools for ABAP , Problem