The tax exceptions report is used to highlight accounting entries that may have an incorrect tax code.
An accounting entry will display on the exceptions report if it's assigned a tax code which is different to the tax code assigned to the account code it is posting to.
It is found under Reports > Accounts > More... > Tax (or VAT) exceptions.
Assigning tax codes to account codes
When creating a new account code or editing an existing account code (under Accounting > Chart of accounts), one of the options is for tax class:
Setting the tax class against an account code indicates that every entry posted to that code is expected to have that tax code applied, but it does not mandate that tax code be used.
For example, the sales nominal code might be given the tax code T20, but when an order is invoiced the tax code is set as T5. This accounting entry will then automatically be listed on the exceptions report.
An item on the exceptions report isn't necessarily wrong - it simply highlights an exception to the rule. It is recommended that you review the report and determine whether each entry is correct or not on a regular basis.