It is important to be honest as nobody wants to be cheated. Once someone started lying and getting things on his way, nobody will ever trust him/her. Even through sincerity and kindness, it will be extremely difficult to get that trust back. I was always tempted to follow hide back the facts at work but to reflect back, "do I want to be cheated as well? What will I do if my colleagues/boss/subordinates lied to me? How do I feel about it?"
Many times I've gone through the pain of telling the truth and yes it's really difficult. The first time i had to do so, it took me 3 hard hours before telling that there's something wrong(very wrong) and we cannot commit it according to schedule. It was between getting scolded by the superiors for not performing or just gamble it and say "sorry, I don't know" much later.
It's nothing to lose for engineers lah... But when I observed the torture of when the workers below me had to go through the interview and get disqualified and fired. I cannot imagine one can live with the guilt of seeing people losing their rice bowl on someone else's mistake.