This is not black and white, but it is interesting that they put part of the answer in the end: "cause them suffering." Let's be careful about what we tell other people if it might cause them more suffering. However if somebody you know praises you incorrectly, at that moment, say "Oh no, no I didn't do that, it's so and so, please, you know they're the ones that did that." So there are times when, yes indeed, don't let other people be confused and praise you when you don't deserve it. At times you do correct it straight away. If it becomes a big issue in the future you might also correct in the future. Now if it could cause more suffering by correcting it, then you might not do it.
But what you might do then is to start living according to what they think you are. Use it to inspire you not to do the wrong things anymore. For example, maybe when you were ten years old you took some money out of your mother or father's wallet. You stole some money from your parents, but they never knew about it. You are now 30 years old. They think that you're an honest person who has never stolen in your whole life. If you go and tell them, "Oh you're wrong Daddy, I stole from you twenty years ago," you'll hurt them, you'll cause them a lot of suffering, there's no doubt about it. Let them continue to praise you for being honest and having never stolen, etc., yet you're going to know that it's wrong.
However, that's who you were 20 years ago. What about today? Can you live that way today and never steal again? So that today you are really an example of someone who has never stolen. Now this is an interesting way of looking at it, and some of you have heard this before: You're looking at somebody who has never drunken alcohol in his whole life. Yet when I was eighteen, nineteen or so I got drunk a few times... But you're looking at someone who has never drunken alcohol in his whole life. Who I am right now has never drunken alcohol. Who I was, that person who I was drank alcohol, but who I am now has not.
So even if you did something before that was incorrect, and wise people praise you now because they think you didn't do it, you've got a chance right now to be the person whom they are praising.