1) best practice is to set a deletion indicator and to create a new correct material. Also cancel all open documents e.g. purchase orders and create them again with the new material after it was created.
You certainly cannot correct it in a way that values that were posted 2 years ago into consumption would now appear as inventory value with a new material material only.
if the materials are valuated then any postings will certainly affect financial books.
2) see 1 and 1001 existing disussions
3) do a physical count and give the users a training so that such physical goods issues without postings in SAP will not happen again in future.