BAE Systems, the defence contractor at the centre of one of the UK's biggest arms sales sagas, should undergo an independent annual audit to make sure it meets the highest ethical standards, the long-awaited report by Lord Woolf will recommend today.

The report by the former lord chief justice was commissioned by BAE in June to draw a line under the years of criticism that have dogged it since it signed a £43bn deal, known as Al-Yamamah, to sell aircraft and other defence equipment to Saudi Arabia in 1989.