It'll affect his credit rating if there's an unpaid balance in collections. He's reporting that the report is fraudulent in the hopes that it won't hurt his score. I don't have a lot of faith in the credit rating system though, so I'm skeptical that it'll do any good.

I have no idea how it'll help and suspect the author is confused about what a fraud alert actually does.

A fraud alert is simply a notice put on your credit files that creditors (before loaning you money, giving you a credit card, etc) will see. Creditors are supposed to call the number you listed before extending credit to make sure you actually requested it. A fraud alert's primary use to prevent identity theft and not to dispute items on your credit report.