Poor soul.
Since the daughter was under 16 one of the parents would have applied on her behalf. If the DLA was stopped the claimant should have been sent a written decision. Your niece should appeal against that decision in writing and ask for a supersession (to overturn the decision) on the grounds that the decision was made on incorrect factual information. Any payments should be backdated.
There's detailed info on the
DWP website
There may be the possibility that the husband could be investigated for making a false declaration.
Hope everything gets sorted out soon.