BAE Systems, the defence contractor at the centre of one of Britain’s longest-running arms sales sagas, will have to undergo an independent annual audit to make sure it meets the highest ethical standards, a report will recommend on Tuesday.

The report, by retired senior judge Lord Woolf, was commissioned by BAE last year to draw a line under years of criticism that have dogged it since it signed a £43bn arms deal known as Al-Yamamah to sell aircraft and other defence equipment to Saudi Arabia in 1989.