First, an easy way is to use a draftsman's triangle. Locate them on a flat surface vertically and butt the edges together, looking for a gap at the bottom or top.
Second would be to do this:
http://www.newwoodworker.com/fxfrmsqr.html
Finally if the combination square is not "square" you can fix it ..possibly? You would have to work on the base, not the short edge.
If you use a feeler gauge under the base to make it square, that's how much you'd have to grind off. It may not be very much.
There may also be a protrusion on the blade that's causing it to travel unevenly. Finally,and most unlikely the blade itself is not parallel.
While not known for their quality Harbor Freight has a variety of squares and you can check them in the store by comparing two side by side or butting them together:
http://www.harborfreight.com/catalogsearch/result?q=squares
I have a set of these:
http://www.harborfreight.com/3-piece-l-square-set-with-levels-98556.html
Like was mentioned, it all depends on how much precision you think you need. In woodworking, where the wood moves, accuracy to .001 may not be practical.
However, an 1/8" in 12" is not acceptable.