yes, it can be fixed. It's buttercream, right? Take some more and smooth it on. Very simple. Let it crust a tad and do the Melivra method for really smooth (unless you're really good with an icing spatula!)
No worries...it can be fixed. I'd remove any "chunks" then refrost the area. Let dry and rub w/ a Viva. Poor little man...he just told you it was a toy...it was really his finger. 
Since you did not specify- I'm assuming the toy was not dragged around on the floor or placed in the child's mouth. I'm also assuming it was properly sanitized directly right before your child grabbed it and stuck it into the cake.
I'm assuming this because: a child's dirty toy or finger is no different that a cat paw. I don't want either touching my food or the utensils that touch my food.
When in doubt- throw it OUT!
Can't blame the little guy for wanting to help! A little more frosting, and a little bit of smoothing, and you should be good to go.
Oh that's beautiful!! Great work!! See, I told you it can be fixed, didn't I?? 
OH it's DARLING!!!!
The flowers are a great touch even without needing to cover anything up!
Great work! 
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