can "naughty" be used to describe a child who didn't behave?

my opinion is "YES". The reason why I even asked is that this American friend strongly suggested never use it since it carries sexual suggestiveness. I, however, believe the usage heavily depends on context.

First explanation of "Naughty" popping up from google says:

(especially of children) disobedient; badly behaved.

example:

"you've been a really naughty boy"

only 2nd explanation, and it's used informally, says:

mildly rude or indecent, typically because related to sex.

Also, I found this video, in which "naughty" was used three times for kids who seem not "behaving themselves":

The teacher thought he was just a naughty kid We are not just naughty, we are just kids with ... Not all kids with ADHD just play old naughty

while the video was from BBC, I don't think it's a sole British English thing.

It seems overwhelming evidences support my claims. Still, what do you think of "naughty"?

I completely agree with you. The primary meaning of naughty remains "misbehaving" in a non-sexual sense. Using the word "naughty" to describe a young child is clear enough context that there is no problem.

Now, in adult conversation the term has certainly gained sexual subtext and could easily be taken to mean something sexual. I'd avoid describing junior or senior secondary students as naughty, or in such contexts where it can be misconstrued (either intentionally or unintentionally).

I've had a similar issue with the word "fun." I commonly ask "what do you like to do for fun?" and often the response is "what do you mean by fun?" I actually have to explain that I mean hobbies and recreational activies done for enjoyment. But this is normally only a problem in specific social groups, not generally.