I have never seen it auto-update: it always asks. I suspect she was a little confused, thinking it was talking about only iTunes.
On iTunes that I setup for other people's iPhones (who I am helping to jailbreak) I turn off "Check for Software Updates Automatically" to prevent that update question from even being asked.
Even if it did check for updates automatically, it comes up asking if you would like to download the latest software. Then it will download it and install at your discretion. Like Tinman said, she most likely may have thought it was updating iTunes.