Valid8

Written by: Chandler Simich, CPA

Fraud. Embezzlement. Ponzi schemes. Shareholder oppression. Unfortunately, these are inevitable parts of today’s business environment. Solving for the financial impact to a business or to the shareholders from these acts requires experience, integrity, and determination.

Here at Cogence Group, we provide investigative services over a wide range of financial forensics projects. These projects include:

-          Economic Damages;

-          Forensic Accounting;

-          Shareholder Disputes;

-          Marital Dissolution;

-          Wrongful Termination, Personal Injury, and Wrongful Death;

-          Data Analysis;

-          Business Interruption Claims;

-          Trade Secret and Intellectual Property; and

-          Bankruptcy Analysis.

Once we perform our analysis, we present our findings to provide support services to our clients and attorneys. One challenge we face with forensic accounting projects is the accessibility of electronic data. Often, we receive financial information in hard copies. The conversion to electronic data can be a substantial time cost. Therefore, Cogence Group uses Valid8, a SOC2 certified, professional grade financial verification software to extract and reconcile data utilized in our financial forensics projects. This software processes a myriad of financial documents including bank statements, credit card statements, check images, brokerage statements, and transaction lists at a massive scale. In addition, identifies any missing or incomplete financial statement data that was omitted in the initial data upload. Therefore, we are able efficiently analyze large datasets with many different types of data to best serve our clients.

Valid8 allows us, as CPAs, to effectively follow the flow of money. Once Valid8 processes the data, we use labeling tools to group and filter accounts and transactions. This information is then populated into an interactive chart. The interactive chart summarizes the cash flow of the sorted data and allows us to efficiently investigate each input and output. Additionally, this chart serves as a demonstrative that clearly and concisely communicates our findings to clients, attorneys, judges, and jurors.

Valid8 is useful for the accelerated discovery and analysis of fraudulent transfers and undisclosed accounts. Valid8’s functions help us measure risk in financial statement accounts and transactions and narrow our focus to the most critical areas. According to the Association of Certified Fraud Examiners, “…it is estimated that fraud takes, on average, more than 12 months to discover. The proliferation of data online, and increased activity in crypto, only magnify the opportunities. Add to that, inexpensive access to capital and consistent economic expansion during the last decade has resulted in high risk and fraudulent activities being more easily masked and even rewarded. But as the money supply becomes more constrained and the cost of capital increases, liquidity, and the ability to access funds will become restricted.” In an environment where there is heightened fraudulent activity, it is important to have tools that help us efficiently review large quantities of information to help serve our clients in a timely manner.

In a recent matter, we were engaged by the respondent in a lawsuit who was being sued for the potential misappropriation of trust assets. Prior to the lawsuit, the respondent had a career in real estate and made monies through investment properties. The respondent, who was the trustee prior to his death, was legally allowed to invest trust assets in this manner. However, the beneficiary believed the respondent’s investments depleted her trust assets.

We were retained by the respondent to help prove at trial that his actions did not deplete the beneficiary’s trust assets and that monies owed to the trust were being reimbursed. During our forensic accounting analysis, we traced all cash transactions to the bank statements to assess all cash inflows and outflows. We identified that the majority of cash outflows were reimbursed by the respondent, and that the amount owed to the beneficiary was only $85,000 higher than the liability recorded within the financial statements. Whereas the beneficiary believed that it should be over $2.5 million higher.

If you or your client need forensic accounting services, our team knows how to dig into facts and identify the truth to resolve your matter efficiently and effectively. We have decades of forensic accounting and litigation experience and are all CPAs. Please give us a call at 503-467-7900!