A: The timing for Hero special abilities are outlined below:

1. JOINING BATTLE:
Attacker and defender are identified, target area is identified, one or more origin areas are identified. 
Resolve Jaghatai Khan’s special ability. 
Resolve Fabricator General’s special ability.
2. Engaging Units 
Participating units are identified.
Resolve Fulgrim’s special ability. 
Resolve Mortarion’s special ability.
Resolve Rogal Dorn’s special ability. 
Resolve Magnus the Red’s special ability.
Resolve Angron’s special ability.
3. Preparing to Fight
Players draw combat cards and Hero combat cards. Iteration marker is placed.
Resolve The Emperor’s special ability. 
Resolve Horus’ special ability.
4. Combat Iterations:
Resolve Sanguinius’s special ability when the Imperial player totals regular damage.
 

Pretty much as expected. Only issue I might have with this order is that Dorn first boosts his people by +1 if in a fortified area, but Magnus can easily cause a breach with his ability. But I suppose this order is there to give Dorn some oomph, whereas against Magnus + Mortarion if their abilities came first, they could easily negate Dorn's and then you'd also have Mortarion's reduction.

So you are saying that Mortarion's ability comes first? So Imperial Fists with two damage points will die before they get boosted by Dorn's ability? I'm not sure if I like that.

Also, what are you basing your information on?

Three Headed Monkey said:

Well, Mortarion always came before Dorn, as per the reference sheet ("This effect applies first, if other effects also affect those units' rank."). There have been a few official answers received of late (as opposed to none during most of the early summer), maybe the OP got his from FFG as well. It is different from the order on, say, Veldrin's Reference sheet (Khan-Fulgrim-Fabricator-Magnus-Mortarion-Dorn-Angron).

Fair enough. Missed that on the card.

Also, FAQ is out now and the answer given in that matches the OP's word for word.