Yes.
I, as a referee, have done this at least once. The catch is that the offender's team is allowed to start the match with the full eleven players. Their total roster, is shortened by one, resulting in one less substitute to chose from.
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Yes. Under Law 5 of the IFAB's Laws of the Game (the rules the world plays by), the referee's authority begins the moment he or she arrives at the field and extends until he or she has left the field.