I am not very sure whether changing a designation like the way you are mentioning is very ethical since the designation does not exist...(which is what I understand)....but yes in my previous organization, lets say if the senior was on a long leave, then the mid mgr level guy used to write f i.e for on his name (which is printed on the letter) and sign, but that was more like the power sanctioned to him by the boss.
First, you been in HR should not allow these kind of practices. You as HR is the one who is responsible for implementing and maintaining the procedures and system, so if you break it nobody will follow it.
Second, you can use a for while signing in place of higher authorities if you have the permission.
Third, a person who is authorised to add, modify or alter the manpower strength should be ideally made responsible for signing the appointment letter, in absense a written communication must be circulated to all mentioning the rank or Designation of the employee who can sign the same. Any person above that Designation or Rank can sign the letter but usually one person is entrusted with the responsibility of signing the letter which is commonly held by the Head of the Department or Head of HR.
Swastik is right.
Please do not fiddle with Appointment orders as you like. There are some set of principles to follow and anybody cannot sign an appointment letter unless he was authorized to do so. Also signing on behalf of some one is to be avoided as far as official orders are concerned (not general circulars). Those who are in top position either in HR or in the organization are generally authorized to sign the appointment orders.
Yes, he can do it.
Just remember one thing any change in Manpower Strength including filling up of vacancy must have written approval of the person to whom your Sr. Manager reports and it would be better if that sanction come from the level of Director or the Owner.
This must be done as a protection as well as a check to stop any deviation from the actual needs.