Elizabeth Mulcahy, of Llandaff, Cardiff, said her accuser had fabricated the claims against her.
She denies six counts of indecent assault against a girl under 13.
Cardiff Crown Court heard that when the allegations were put to her by police, she said: "It's a big lie - total, blatant - I never touched her."
Ms Mulcahy is accused of touching the girl inappropriately, starting when the alleged victim was under 10 and continuing until she was 13.
In interview, she said: "For me to touch her like that, I've never heard anything so horrible in my whole life."
The case continues.
Claims an 82-year-old woman sexually assaulted a young girl in the 1970s and 1980s are "total lies", a court has heard.