My cousin came to me few years ago saying that her sister in-laws son (her partners sisters son) has been touching their daughter. She was 2 at the time and him 4. This hasn't happened just once it has happened quite a few times and now she is 5 and a half is having trouble with eating and doesn't want to attend school. After the boy went away for school holidays to his fathers and came back this all started happening. They now hardly ever see each-other but when they do it is fully supervised but I think that she has really taken this to heart and it has really messed with her head. She thinks that she is in trouble for doing something wrong when she hasn't and we have suggested that she talks to a counsellor but I don't think she quite understands everything that has gone on. Any help or suggestions would be greatly appreciated.

'we have suggested that she talks to a counsellor but I don't think she quite understands everything that has gone on'
Surely you don't mean you have suggested this to the 5 year old? The suggestion should be made to the parent.
If she feels confused and won't go to school, yes, she should see someone professional. 99% of it is how the adults have acted about all this, and she is picking up subtle and not so subtle cues from them. She may now think that all boys are something to be feared. Trouble eating, not so clear what you mean, or if it related to this or is a stage a lot of kids go through.