3” pushes into 4”?

Got sent to a call yesterday to dig down to sewer and water main where it goes in through the foundation. Customer was getting water in basement coming in from sewer main. I wasn’t the one to sell the job, they just sent me there and told me what to do. So I dig down the the water and sewer. The idea was to seal around the pipes where they go into the wall because they assumed it was ground water. If we were to find a break in either line we would make repair. Got to the water main first and sealed it up. Good to go. Next I dig up the sewer and noticed that a fitting had come apart right by the wall. There are a few inches of 4” abs coming through the wall then the t for cleanout. It looks like the cleanout separates from the piece coming through wall. Next I go inside for the first time to see what’s going on in the basement. As you can see in the picture it looks like they shoved a 3” y into a piece of 4” coming through the wall which is the piece of 4” I see stubbed out outside. I’m assuming they put a few feet of 3” on that y and just pushed it into the 4” outside right? So what’s the right fix for this? Remove that y and reinstall with a 3x4 coupling outside? The whole house drops into that 3” y at the wall then it goes to 4 outside

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