Fraudulent Firm Classification in External Financial Audits using Machine Learning
Bibliographic record
Abstract
This study investigates the application of machine learning techniques to classify fraudulent firms in external audits, addressing the increasing complexity of financial fraud detection. The novelty lies in the integration of Particle Swarm Optimization (PSO) for feature selection and the evaluation of ten state-of-theart classifiers, including J48 and Bayes Net, using comprehensive performance metrics such as accuracy, sensitivity, specificity, and AUC. Data from 989 firms across 14 sectors were analyzed. The results demonstrate that J48 and Bayes Net achieved the highest accuracy (94%) and robust sensitivity (91%), highlighting their effectiveness in fraud detection. This research contributes to audit planning by proposing a decision-support framework that optimizes resource allocation and enhances fraud detection efficiency. Future work will focus on ensemble methods and big data technologies to further improve scalability and applicability.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.001 | 0.002 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.002 | 0.001 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".