No you have already laid your cards on the table, you call it a Terrible Report and then go into a laundry list of errors you found or disagree with. If you are the general public you can do anything you want because your are not under USPAP BUT if you are an-appraiser I would suggest you move on and get a life. Because a good State Board Investigator will request that you send Him/Her your complete work file. You are in a grey area now acting as a reviewer, and you also may have a Lender/Client issues, because they did not engage your services to do a review or make decisions for them on how to handle a poor quality report. Anyway remember sometimes the "Hunter Becomes The Hunted " If your work file is not complete and your opinions are not supported you may be the one who ends up in trouble with your State Board .
When I complete Review assignments I do not turn anyone into the State if there are problems. Reason I don't is because the Confidentiality Rule Covers me also. I just don't see it as my responsibility. I give the Client the results and they can do what they choose with those results.
Some might say that if an appraisal under review is fraudulent that may be my duty as a citizen to turn it in. Even their I will not. Again I lay out the Findings and let the Client make those decisions.
To the OP I would suggest you turn the Update Assignment Back to the Client. I don't even think you need to explain. Stay out of that cat fight. It is nothing but trouble and a pain in ur butt. Simply it is not worth the money.
The State appraisal board has a jurisdictional exception. You can make a complaint without violating USPAP. If you don't feel like you want to get involved with the Board's investigation, send it to them anonymously.