Pembrokeshire council has signed off its accounts despite a row over the pension arrangements of senior staff.
On Friday it emerged the Wales Audit Office (WAO) would not approve the accounts after some staff were allowed to opt out of the council's pension scheme for tax purposes.
Pembrokeshire and neighbouring Carmarthenshire face claims that payments in lieu of pension were unlawful.
The WAO is due to meet the councils.
Both Pembrokeshire and Carmarthenshire have allowed some of its highest paid staff to leave the Local Government Pension Scheme.
Those that opt out would receive a cash equivalent of the employer's pension contribution which could be more beneficial to them for tax purposes.
But the WAO said that no other Welsh council had allowed its top staff to opt out of the pension scheme and it has questioned the legality of the matter.
Pembrokeshire council said the change was aimed to "aid the recruitment and retention of senior staff."
And it said the changes involved no additional costs.
But the WAO refused to sign off the authority's 2012-13 accounts until legal discussions were resolved.
It said its decision was based on what was termed a "difference of opinion" over the legality of the change.
The issue concerns payments to Pembrokeshire's chief executive, Bryn Parry Jones.
On Monday, the authority's corporate governance committee voted to sign off the accounts despite the WAO's objections.
The committee heard that in the longer term those on higher salaries would benefit later on from opting out of the scheme, though in the short term it would mean they pay more tax.
Council leader Jamie Adams said it boiled down to whether the individual wanted to pay tax after they retired or while they were still working.
So far only the chief executive of Pembrokeshire has been a beneficiary of the scheme, although the council have confirmed that one other person - a head of service - will now be a beneficiary.
Later this week, lawyers from the WAO and lawyers jointly representing Pembrokeshire and Carmarthenshire are due to meet over the issue.
Both councils claim they had legal advice that payments made to the chief executives of both authorities were lawful.
Carmarthenshire's audit committee discussed the issue on Friday.