Q. This is the report created whenever a stage/project plan exceed the relevant tolerance bounds.
A. An exception report is a type of summary report that identifies any events that are outside the scope of what is considered a normal range. Reports of this kind are employed in a number of settings, including the process of inventory reconciliation, project management investigation, and even employee assessments. Exception Report play a vital role in Management by exception. Management by Exception is a "policy by which management devotes it's time to investigating only those situations in which actual results differ significantly from planned results. The idea is that management should spend its valuable time concentrating on the most important items (such as shaping the company's future strategic course). Attention is given only to material deviations requiring investigation."
The type of tolerance is specified at each level for example time, cost, benefits, scope, risk or quality will be used in creating the Exception Report. The next step is to create the exception plan (based upon the information contained within the Exception Report), which is created by the Project Manager in order to advise the project board that tolerance is forecast to be exceeded as well as to present a range of options and recommendations outlining the actions to take in order to resolve the situation.
[Source - Internet]