Here’s how you do it:

  • Log on using an administrator account.
  • Open the Active Directory Users and Computers tool.
  • Right-click the container holding the domain controller and click Properties.
  • Click the Group Policy tab, and then click Edit to edit the Default Domain Policy.
  • In the Group Policy window, expand Computer Configuration, navigate to Windows Settings, to Security Settings, and then to Local Policies.
  • Select Audit Policy.

Check out this link for best practice advice:
http://technet.microsoft.com/en-us/library/dd277403.aspx

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