Think about it. Your village raises sheep and wolves are a real risk. If your watch out lied about seeing wolves, he should have been beaten and scolded for doing so. If they gave him a second chance and the boy lied again, he should have been fired. The boy shouldn't have even been given a third chance, but since they did, then there was no reason to ignore the boy's cries. These sheep were the village's livelihood; they should have ran out to check on every alarm.
Every way that you examine the story, it is riddled with plot holes. I understand that it's a story for children, and that children generally don't pick apart the plot of these stories, but I just feel like there should be better stories to teach us that lying is bad.