Auditor KPMG has refused to approve bailed-out Banco Espirito Santo's first-half report and accounts, published today.
The auditors cited the bank's failure to provide adequate information on its financial position and also warned of possible further losses.
BES's consolidated report confirmed a loss of nearly €3.6 billion, first revealed on July 30, largely due to its exposure to its founding Espirito Santo family's crumbling business empire.
The losses forced the Bank of Portugal to step in on August 3 with a €4.9 billion rescue plan for the country's biggest bank, using public funds.
Regulators also decided to put BES's healthy assets into a new entity, Novo Banco.
BES's exposures to the troubled Espirito Santo business empire as well as its Angolan subsidiary are to move into a "bad bank."
KPMG, which had been hired to audit the results, said in a report published alongside BES's accounts that these did not provide any adjustments and additional information required as a result of the rescue.
KPMG said this meant the BES report no longer provided adequate information on the bank's financial position and operations.
The accounting firm said that "the classification, recoverability and realisation of assets as well as repayment of its debts registered in the financial results as of June 30 is uncertain."
KPMG also said the criteria of evaluation of BES assets transferred to Novo Banco were still not clear.
It said today that provisions set aside by BES to deal with Espirito Santo group's debt sold to its retail clients may not be enough as it risks having to make further contingencies, which so far have not been specified.
The accounting firm said that senior bonds with maturities going out as far as 2022 issued by BES worth €2.7 billion, already recognised in BES' liabilities, could incur unspecified further losses for BES if it were forced to buy them back.
The auditors also pointed out that it was impossible to quantify the impact from the Angolan state's intervention in BES' Angolan arm BESA, which led to the revoking of a state guarantee issued for up to $5.7 billion, or 70% of BESA's loan book.
The National Bank of Angola announced the intervention on August 4 and the BES first-half report failed to reflect that.
The BES report stated that the state guarantee remained in place.
KPMG said it had tried to obtain a written confirmation from the BES board that would acknowledge these new developments as well as assume the responsibility for the balance sheet's accuracy.
KPMG said no such confirmation was provided, "which constitutes a significant limitation in our work."
BES and its successor Novo Banco have already encountered difficulties as they try to recover some of the Espirito Santo family's massive debts, with some investors and a family holding company trying to block the sale of insurer Tranquilidade.
The bank's new management - put in place by Portugal's central bank in July - has said it suspected illegal behaviour had taken place at the bank.
The Bank of Portugal has ordered a forensic audit of Banco Espirito Santo.