Final answer:
Section 404 of the Sarbanes-Oxley Act requires corporate management to affirm the effectiveness of ICFR and to report any deficiencies found. (option c) The act aims to safeguard investors by improving the reliability of corporate financial reporting, a response to historic corporate scandals. Although separate legislations called for banking transparency, the 2008-2009 crisis revealed oversights in regulatory foresight.
Step-by-step explanation:
Section 404 of the Sarbanes-Oxley Act is a provision that requires management to assert the effectiveness of Internal Control over Financial Reporting (ICFR) throughout the fiscal year. This section mandates that management must accept responsibility for establishing and maintaining adequate internal controls and procedures for financial reporting. Additionally, if any deficiencies in ICFR are found, management is required to report these in a transparent manner.
The implementation of the Sarbanes-Oxley Act was a direct consequence of a series of major accounting scandals involving corporations like Enron and WorldCom. The government enacted the Sarbanes-Oxley Act with the intention of bolstering investor confidence in the financial information provided by public corporations, thereby protecting them from the types of accounting fraud that preceded the act's passage.
Despite laws in the 1990s that mandated bank supervisors to disclose their findings and act promptly on identified issues, the financial crisis of 2008-2009 led to criticism over why regulators failed to anticipate the fragility in the banking sector beforehand, which resulted in substantial losses.