1. You can ask your friends or family members to write you a reference letter.

Correct

Incorrect.
You should not ask your friends or family members to write your reference letter. Instead, you should invite someone like professors, supervisors or employers to write your references.

2. Exaggeration of skills and performance is allowed as it may create a greater chance for the applicant to secure an interview.

Correct

Incorrect.
The purpose of job references is to prove whether the applicant is suitable for a job but not to provide a false picture to the prospective employer.

3. It would be nice if you could state your relationship with the applicant in an introduction.

Correct

Incorrect.
It is important to state your relationship with the applicant at the very beginning of a reference letter as it helps the other side to consider the validity of the reference letter.

4. The best way to deal with a reference letter is that you draft one and ask the referee to sign afterwards.

Correct

Incorrect.
To ensure the validity of a reference letter, you should ask your referee to write it on his/her own and send it to the prospective employer directly without your involvement.