Internet provider Tiscali was dealt a fresh blow today after it revealed its auditors had refused to sign off its accounts.

Ernst & Young warned of "fundamental uncertainties" on business continuity and said it was not able to give an opinion on the company's full-year results.

The auditors said that Tiscali, which had almost 1.8 million UK broadband customers at the end of September last year, could only continue if it renegotiated its debts with lenders.

Tiscali, which is based in Cagliari, Sardinia, has businesses in the UK and Italy. It had around 2.3 million broadband customers at the end of last year.

Fears over the company's future have haunted the broadband firm since negotiations with BSkyB over the sale of its UK business failed in March.

The firm put the division up for sale last year as it sought to reduce its debts, which are now thought to stand at around 600 million euros (£531 million).

Tiscali contested the auditors' conclusions and said it would propose a plan to reduce the firm's losses at a shareholder meeting later this month.

In a statement the company, which is negotiating with creditors over its heavy debt burden, said it had already agreed a standstill arrangement with banks until June.

Tiscali said lenders had indicated in writing that they would be prepared to extend this until the end of 2009.

"The company, in disagreement with the conclusion drawn by the audit report, believes that it has co-operated at best and that it has provided all the information necessary to enable the independent auditors to issue an audit opinion on its 2008 financial statements," the firm said.

Tiscali, which employs around 700 staff in the UK, saw its attempts at reducing its debt stall when the Sky talks failed to bear fruit.

At the time the firm said worsening market conditions made it "impossible to proceed" with a deal with the broadcaster.

Shortly after the talks collapsed Tiscali said it had asked lenders to suspend interest payments and covenant terms as it attempted to restructure its debts.

Today, the firm said that it would put forward a plan to use capital to cancel part of its 2008 losses at a shareholder meeting on 30 April.

Carphone Warehouse has reportedly also had its eyes on the UK broadband business, but a bid has yet to materialise.

Tiscali was formed in 1998 following the deregulation of the Italian telecoms market.

Tiscali's shares have tumbled in the uncertainty over its future. They were down almost 6%, to 0.36 euros today.