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Certified Public Accountants
(877) 986-4300

Litigation Consulting


Forensic Accounting - Fraud - Business Valuation



March 2012

Recent Case:

"Embezzlement of Company Funds"

Summary of Issue:
Members of the board of directors contacted Arxis Financial, Inc. to discuss a strange pattern of information and lack of information being provided to the board. The conference call revealed that once the board began asking questions of management, the CEO resigned. After an initial discussion it was determined that the pattern suggested more than incompetence. Several facts pointed towards potential fraud.

Money involved:
Over $200,000 was found to have been misappropriated.

Arxis' work:
We proposed a multi-stage engagement. Phase 1 was designed to establish whether there was evidence confirming fraud rather than simply incompetence or sloppiness by management. Phase 2 was designed to quantify a preliminary loss given specific parameters determined in phase 1. In simple terms, phase 2 was designed to pick the "low hanging fruit" and establish the basis for the board to determine a legal course of action, if any. Phase 3 was designed to complete the investigation and prepare for civil or criminal prosecution.

Phase 1 established that indeed there was evidence of both management sloppiness that allowed for unauthorized financial transactions, as well as evidence that such transactions had taken place. On the first day that Arxis was on-site the CFO resigned. The board was completely unaware that there were no internal controls.

In phase, 2 Arxis reviewed several years of bank reconciliations and traced cancelled checks and deposit slips back to the accounting records. This process exposed unauthorized payments as well as a sophisticated attempt to cover the payments so that reports to the board would not reflect the actual economic activity. Arxis presented the findings to the board and recommended that phase 3 was not necessary as there was no insurance to cover the loss and the board had determined that there would be no prosecution.

Arxis assisted in assuring the security of the computer network and establishing a system of internal controls and reporting that, if maintained, would eliminate the possibility of continuing problems. The board of directors terminated several members of senior management and the outside audit firm. Arxis assisted the company with the identification and hiring of qualified accounting staff and replacement auditors.


Upcoming Speaking Engagements for Chris Hamiltion

March: Forensic Accounting Academy in Chicago. 8 hours of presentations on Behavior Detection, Interviews, and Interrogation.

April: Business Valuation Training for the Franchise Tax Board in Sacramento, CA

April: "Forensic Accounting Issues in Wildland Fire Cases" presented at the 2012 Wildland Fire Litigation Conference in Sacramento, CA

April: Online/Webinar Business Valuation Fundamentals, Techniques, and Theory for the Internal Revenue Service.

Practice Profile:

Litigation Consulting Services for Business Valuation

Every month, we profile a different service offered by Arxis Financial. This month, we invite you to learn more about our Litigation Consulting Services for Business Valuation.

Arxis Financial's "Litigation Consulting" practice provides objective and independent evaluation of business valuations, in particular, the economic and financial issues involved in commercial and civil litigation. Business valuations can be prepared by Arxis Financial personnel, and supported in litigation proceedings by our "Litigation Consulting " personnel. We can also evaluate valuations prepared by experts hired by opposing counsel.

Our specialists have extensive experience in presenting and defending our findings in litigation proceedings, including depositions and trial at local, state and federal court levels, as well as mediation and arbitration. We assist attorneys in interpreting the valuation, and help counsel to understand and analyze events or issues. This level of support can be a key asset in determining a legal strategy as well as reaching a reasonable and efficient conclusion.

Our clients benefit from having valuation professionals who understand the realities of market valuations much better than the purely theoretical practitioners, resulting in very defensible and clear valuations. A key reason that attorneys engage Arxis Financial is our ability to analyze, explain and present financially complex valuation issues, which is an important asset in determining a legal strategy as well as achieving your client’s goals. Our experts are well-known in the industry and highly respected for their depth of knowledge and resources

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Copyright 2012 Arxis Financial. Articles may not be reprinted without permission.



Chris Hamilton Photo

Chris Hamilton, CPA CFE, CVA, DABFA
Certified Public Accountants
(877) 986-4300

Chris Hamilton Photo

Litigation Consulting
Forensic Accounting - Fraud - Business Valuation



Clients know us for results. Opposing counsel know Arxis for wishing they had hired us.