Software Engineering Institute

Microsoft Office contains a vulnerability that could be exploited when parsing specially crafted Smart Tags. According to Microsoft Security Bulletin MS06-062:

When Microsoft Office opens a specially crafted Office file and parses a malformed Smart Tag, it may corrupt system memory in such a way that an attacker could execute arbitrary code.
This vulnerability affects Microsoft Office for Microsoft Windows XP and Microsoft Windows 2003.

A remote, unauthenticated attacker may be able to execute arbitrary code with the privileges of the affected user or cause a denial of service condition.

Update
Microsoft has released an update to address this issue. See Microsoft Security Bulletin MS06-062 for more details.

Do not open untrusted Microsoft Office documents

Do not open unfamiliar or unexpected Microsoft Office documents, particularly those hosted on web sites or delivered as email attachments. Please see Cyber Security Tip ST04-010.

Disable automatic opening of Microsoft Office documents

By default, Microsoft Office 97 and Microsoft Office 2000 will configure Internet Explorer to automatically open Microsoft Office documents. This feature can be disabled by using the Office Document Open Confirmation Tool. Mozilla Firefox users should disable automatic opening of files, as specified in the Securing Your Web Browser document.

Do not rely on file name extension filtering

In most cases, Windows will call a Microsoft Office application to open a document even if the document has an unknown file extension. Filtering for common extensions (e.g., .ppt, .xls, and .doc) will not detect all Microsoft Office documents. Additionally, a Microsoft Office file with no file extension will also open with a Microsoft Office application.