Warning: I'm not a lawyer
The fact that your boss asked a co-worker, instead of doing it himself, shows his real motives. The person who fudges the documents is the one who gets the blame (and possible prosecution). If you look at these big banks and their scandals, you often hear about how "shocked" the senior managers were that fraud was happening right beneath them. They can claim that because there are no official records that put any blame on them. Some low level trader gets all the blame and is fired.
This is a dangerous issue with no real solution. Your friend should ask his boss to confirm what he wants to do in writing. If the boss refuses, your friend should send an email anyway, saying something like:
Dear boss, can you confirm by email that you want me to photoshop and modify contract XX? PS- Can you also confirm this is legal?
CC HR and anyone else involved.
He should then print the email and keep a copy, as it might be used in a court. Remember, the boss will deny everything. Always assume that the thing will end up in court, and everyone connected to the case will be treated with suspicion. So keep all records, don't agree to anything, even verbally, and be sure to update your resume in case it gets ugly.