（2009）A Meta-Learning Approach to Predicting Financial Statement Fraud.pdfVIP

JOURNAL OF EMERGING TECHNOLOGIES IN ACCOUNTING American Accounting Association Vol. 6 DOI: 10.2308/jeta.200 2009 pp. 5–26 A Meta-Learning Approach to Predicting Financial Statement Fraud Thomas E. McKee Medical University of South Carolina and Norwegian School of Economics and Business Administration ABSTRACT: An “ultimate learning algorithm” is one that produces models that closely match the real world’s underlying distribution of functions. To try to create such an algorithm, researchers typically employ manual algorithm design with cross-validation. It has been shown that cross-validation is not a viable way to construct an ultimate learning algorithm. For machine learning researchers, “meta-learning” should be more desirable than manual algorithm design with cross-validation. Meta-learning is con- cerned with gaining knowledge about learning methodologies. One meta-learning approach involves evaluating the suitability of various algo- rithms for a learning task in order to select an appropriate algorithm. An alternative approach is to incorporate predictions from base algorithms as features to be evaluated by subsequent algorithms. This paper reports on exploratory research that imple- mented the latter approach as a three-layer stacked generalization model using neural networks, logistic regression, and classification tree algorithms to predict all categories of financial fraud. The purpose was to see if this form of meta-learning offered signifi- cant benefits for financial fraud prediction. Fifteen possible financial fraud predictors were ident