Sometimes a professor will bump up a student's grade because of things like creativity, improvement, or demonstrated hard work. So neither you nor your classmate actually know that a mistake was made.
In addition, there's a trust issue. Your classmate trusted you with their doubts about their grade. Now, sometimes violating such trust is the right thing to do (as in the case of outright cheating), but you need to have a very good reason.
Finally, there's the question of impact. If grading in this class was not competitive, your classmate's grade has very little effect on anybody else. The only effect it could have is in competition for internships or jobs, but in many fields, GPA is not particularly important for such things. (I don't know about engineering.) Even if the class was graded competitively (some percent A's, some percent B's, and so on), it's rather unlikely that the professor will recompute everybody's grades after changing one.
Edit: Also, what will the instructor think of you? I guarantee they will not think, "Wow, this person is really honest and conscientious". More likely, they'll think you're grade-obsessed and willing to hurt somebody else to get ahead, even if that's not your motivation. At best, they'll shake their head and go, "Kids and grades these days...". If you have this instructor again, or if they tell their colleagues, this could come back to bite you.
Putting these considerations together, it seems to me that you should not report the suspected error. (If your classmate is feeling courageous, they may want to ask.) Focus on your own grades (and, more importantly, learning), not other people's.