I think I may know the answer to that part but more so, what can I do to stop her?
My DD is 11yo and in her final year of primary school. Her dad and I have not been together for 9 years and have no relationship as such. Part of the reason we split was his obsessive lying. Not always to me I should add, it's the kind of lying to impress people/exaggerate situations. For example - if he would be relaying a story to friends when we were together about a night out we had - I would be a bit 
at some of the enhancements he added.
I am starting to notice this trait in my DD. She can start off telling me a fairly truthful story about her day at school but the moment she starts enhancing it - I can absolutely tell. Something unrealistic that a teacher may say or a friend may have done. When I confront her about it, it will be a lengthy denial before she admits she is not being truthful.
She also lies when she thinks she is protecting her fathers lies. Recently she came home and told me that her father had arranged for her favourite celebrity to come to her school and perform in front of the school for her. When I had to bring her back to earth and gently tell her that this would not be possible as there is no way in this earth that her father would have any connection with this man, she told me that he knows he was telling the truth because she saw her dad play football with this celebrity. Finally this was revealed as a lie and she just didn't want me to think that daddy was a liar. I know that I need to deal with the father about his lying to her - I mean, imagine she went into high school and told the kids at school this? She will be the liar, get bullied and have no friends. It is not only me that she will tell these 'stories' to and i almost die of embarrassment when i know she is doing it when talking to other people. But my issue and question from this thread is how do I stop this trait of lying?
We have been through every motion and emotion with it. We have sat and talked gently, I have explained to her the story of the boy who cried wolf, I have shouted (I can count the number of times I have shouted at her on one hand as this is not my parenting technique) - I even confess to having cried in front of her because it has upset me so much. I cannot abide liars and it is an absolutely disgusting trait that I just will not have in my house, especially when there is no need. I understand sometimes masking the truth to protect somebody sometimes and I understand little white lies if there is a particular reason. I am by no means perfect but I just cant tolerate lying.
What do I do?