Need Advice in CA for a Friend Re: Report to CPS

Hello All. I have a friend who has found herself in a bad predicament. She lives at home with her mother, sister, her two children and sisters two children. She has always had a volatile relationship with her sister. I have known the family for 13 years, and her sister is abusive and an all around terrible person. She (sister) has a friend who recently lost all four of her children. The three youngest are in the process of being adopted out after CPS took them a year ago. She lost her oldest daughter many years ago.

Long story short, sister's friend was in care of the children while my friend was in the hospital giving birth a month ago. Suddenly accusations came about, of my friend's daughter (age 11) molesting her sisters daughter (age 5). Everything centers around the sister's friend seeing things she thought were suspicious. She says she walked in on the girls in the bath last summer and the older one jumped as if she had done something wrong. She saw the younger girl touching herself. She heard the little one screaming with her shirt off. Every time it was her and only her who saw these things. Sister's friend has a history of making things up, and in fact one of her children she lost custody of was molested.

My friend's daughter was told by her aunt that her daughter said she molested her. My friend's daughter then said something did happen in the bath last summer. She said that it happened more than once and that she and her cousin touched each other. I don't know how innocent it was or what ideas may have been planted in the head of this child by her aunt and/or the friend. The younger child actually hasn't said or confirmed anything. Now, my friend's sister called CPS and reported her niece today, saying shes a rapist/molester. Saying she wants her in juvenile hall. She has yelled these things in front of the child. She also sent me messages saying that her niece is evil and a bad seed. The sister hangs out in the garage all day with her friend getting high. She doesn't watch her kids, in fact many times has left the niece to watch her daughter and taken off. She is running a facebook page bashing CPS in an attempt to help her friend get her kids returned, at the same time she called CPS and made this report.

Clearly, my friend has made a bad decision being in this environment in the first place, and allowing these people to watch her daughter while she was in the hospital and last summer when she was attending college. My friend's daughter is a normal, sweet little girl. I'm not saying this didn't or couldn't have happened. We really don't know. Fact is, my friend is very frightened. She doesn't know what the possibilities are when CPS comes, if they do find something happened. She doesn't know what she should tell them about her sister. Should she spill about everything. The crazy friend, their drug use, and the anti-CPS sites on FB?? Anyone have experience on this or advice? Does anyone know what constitutes sexual abuse in children vs. normative play? The kids would have been 10 and 4 last summer. My friend does not believe her daughter was abused prior, and neither of
the children ever acted out as if they had been abused.

Advice and or opinions would be greatly appreciated. Sorry so long...there is actually a lot more :/