Despite the fact that the 1940 census was supposedly the most accurate, it clearly had mistakes.
My mother was raised by her grandparents as her mother was unmarried and worked not only out of home but in the next state where she more easily found work. She grew up as "one of her grandparents' children" but of course knew she was their grandchild.
When the census was taken, my mother was listed as child age 5 and her grandparents were aged! Why the census taker would not have questioned that, who knows? Maybe it was assumed.