Can lost iphones be traced if they've been reset and the simcards been changed?

My friend found an iphone 4 or 4s on a bus, i told her to hand it in but she refused and says if she leaves it for a month or more they'll have cancelled their connection and card details anyway so if she resets it and changes the simcard they won't be able to trace it, is this true?

No, it will be reported as lost/stolen to the network, and they will block it across all networks. Also, if she tries to connect it to iTunes, then iTunes will detect it as stolen, and block the iTunes access, rendering it useless.

She needs to hand it to the police, or take it to a mobile phone shop, of the network that is on the sim card. For example, if the sim card in the phone is on Vodafone, take it to a Vodafone store. She will not be able to get it unblocked, and unlocking it to use on another network will not make it work either.

If the original owner decides to go down the trace route, and tries to find their phone (it is the original owner's phone - not your friend's phone) then your friend could be arrested for theft by finding, for keeping something that is not theirs to keep.