The report released by a trade group backed by rivals of Microsoft, highlights longstanding concerns about the national security risks posed by the company's near-monopoly in personal computer software.
The study was unveiled at the Computer and Communications Industry Association's (CCIA) meeting of industry leaders and top government officials.
Microsoft spokesman Sean Sundwall said the company "considers security for all of our customers ... to be our absolute priority.
"We've worked with privacy experts and consumer advocates and others to make our systems as secure and reliable as possible," Sundwall said.
Sundwall did not comment on the motives behind the report. But the pro-Microsoft Americans for Technology Leadership (ATL) called the report a veiled effort by the company's rivals to undermine the software giant.
"CCIA, which represents a few powerful Microsoft competitors, has tried everything possible in their endless campaign to target the company," said ATL's Jim Prendergast.
"At a time when the American public is concerned about all forms of security, it is shameless for CCIA to use those fears to advance the interests of a few of their members. This paper can be seen as nothing less than marketing by fear to line the pockets of a handful of large companies."
The report said Microsoft has remained the dominant software maker after settling its antitrust case with the government, and that "the monopoly product we all now rely on is thus both used by nearly everyone and riddled with flaws."
"CCIA, which represents a few powerful Microsoft competitors, has tried everything possible in their endless campaign to target the company"
Americans for Technology Leadership
"This report underscores and explains many of the dangers that we have warned of for some time," said CCIA president Ed Black.
"Microsoft's monopoly threatens consumers in a number of ways, but it is clear that it is now also a threat to our security, our safety, and even our national security."
Last month, CCIA called on the Department of Homeland Security to reconsider its recent decision to choose Microsoft as the main supplier of desktop and server software, saying the move "will not provide adequate security and stability to protect of our nation's most important computer systems”.
Concerns over attacks were heightened with the recent Blaster and SoBig viruses that clogged global computer networks and shut down some corporate and government systems.