You are asked to approve accounts containing tax balances you cannot explain

The first approval arrives before the explanation

A hypothetical new director is asked to approve financial information containing a tax liability that differs from the amount discussed during the handover. The bookkeeper says the difference is just a reconciliation item. Ask what that means before treating the figure as understood. A label does not explain the underlying transaction, reporting status or possible urgency.

Identify the exact decision requested

Clarify which document needs approval, the purpose of the approval and when it is required. Preserve the version supplied. Ask the accountant which obligations and periods the tax line includes. Do not sign a different version on the assumption that an explanation given for an earlier draft applies equally to the revised figures.

Stay informed rather than relying on the label

ASIC's director guidance emphasises understanding the company's financial affairs and maintaining proper records. Request a reconciliation that identifies the source balances and explains material differences. This article does not determine whether a particular approval should be given or establish director penalty liability. Obtain professional advice on the unresolved information and your responsibilities.

Source: ASIC: Insolvency for directors

Turn the difference into specific questions

In the hypothetical example, part of the difference relates to a payment recorded in the ledger but not matched to the account extract provided. Ask for the payment evidence and allocation explanation. Other differences may have another cause; do not copy that explanation across the whole balance. Keep each unresolved component visible until it is supported.

Record the questions and responses

Retain the information requested, the answer received and any supporting document. If the explanation changes, preserve both versions and ask why. Do not create a retrospective record implying the director had information that was unavailable at the time. Escalate significant gaps and any formal tax notice promptly to the relevant adviser.

Make the approval decision with advice

Ask what further information or action is required before responding to the approval request. CRP can help organise the financial issues for review. The practical step is to replace an unexplained reconciliation label with traceable facts, so the new director understands the information being put forward and the matters that still require attention.