There are 2 ceremonial items on the ground, and Josephine should drop the third. It is a staff, so check your weapon inventory and see if you have any unidentified staffs. Also, it may have dropped behind the stairs or wall, so hitting the alt key and moving your mouse cursor methodically over areas hidden from direct view may find it.
screenshot:
The three Elven Ceremonial Items (70KB)
If you do not have it, you can replace the third ceremonial item using the technique in the following topic.
Lost Items - guide and directory of inventory files
