How old is your Collie?
I would be very careful. While it may have just been a warning snap with no actual ill intention behind it you never know if they will just 'snap' one day and have had enough.
I know this sounds obvious but never leave a child unattended with a dog, even the sweetest dogs can get a bit upset with a pushy child.
Does your sister live with the dog or was she just visiting?
At 4 she is quite capable of learning how to behave properly around dogs so it might be time to give your sister a few little lessons.
Just teach her that dogs do not like the be crowded or cornered and that petting him is ok but cuddles and kisses are not.
Teach her that she should only touch the dog if he knows she is there so she doesn't surprise him as well.
And you can also start to teach her the warning signs of when a dog is upset or does not like what is happening. (ears back, growling, baring teeth, pulling way etc. )