Insync (& Google app) downloads the Google Format files, when not being converted to Office format as .gddoc, .gdsheet etc. (.gdoc, .gsheet etc.) - these files do not contain any data but metadata & can be thought of as shortcuts to the corresponding Google Format files on Google Drive web.
When you add (/copy) .gdoc/.gddoc etc. locally, Insync tries to create a copy of the corresponding Google format file on Google Drive under that new location.
If the account doesn’t have access to the corresponding Google format file (anymore), Insync would encounter “File not found” error.
To fix that error, please remove the corresponding .gddoc, .gdsheet etc. files from the Insync folder.
I hope this helps! Please let me know if errors persist after this fix. 