The audit of your client Sprightly plc revealed a major control weakness in the management of investments. The company recently recruited a financial analyst, as an employee, to manage the investment of surplus funds. Company policy is to invest in the shares of large quoted companies. The audit discovered a number of situations where the financial analyst had made substantial profits for the company by speculating in risky investments such as derivatives. Such investments could result in massive losses. The matter was reported in writing to the chief financial officer four months ago but no action has yet been taken.

What action should the auditors take in respect of this discovery?