A child can have an erection (erection can even occur in utero) The issue here is whether or not you and the parents absolutely suspect that something had taken places such as molestation, digital penetration, etc.
Some things the family can do is to 1/ install a hidden nanny camera 2/ ensure that the two of them are never left alone, 3/ have the daughter examined, 4/ talk to the boy and if needed bring him to see a psychologist.
Signs to look for
At this point speculations would not be helful to the parents. They would have to refrain from asking the son leading questions.
If it is absolutely confirmed that the boy had dones something, then he will need to work with a specialist not a generalist (it is not recommended that this something you or the parents should try to remedy on their own)
Sandy Kleven Sandy Kleven (Author) ›Jody Bergsma (Illustrator)