Auditing is very similar to Performance Monitor, in that it waits for a specific event to occur, and then reports on it within the Event Viewer. Instead of waiting for system performance events, auditing usually tracks the success or failure of system and security events
Auditing is generally turned on through a security policy, which is another part of Group Policy. These security policies are generally accessed through Administrative Tools.
HERE IS WHAT THEY DO
Audit Account Logon Events: Tracks user logon and logoff events.
Audit Account Management: Reports changes to user accounts.
Audit Directory Service Access: Reports access and changes to the directory service. If the system is a member server or XP system, directory service is NTLM-based, and consists of user accounts and group policies.
Audit Logon Events: Reports success/failure of any local or remote access-based logon.
Audit Object Access: Reports file and folder access. Must be implemented here, and then the individual file/folder must be configured for auditing within its properties in order to fully enable this feature.
Audit Policy Change: Reports changes to group policies.
Audit Privilege Use: Related to Audit Object Access: reports when permissions are utilized such as read, or full control.
Audit Process Tracking: Reports process and program failures. Not security related.
Audit System Events: Reports standard system events. Not security related.
If it becomes necessary to audit file or folder access, the audit policy must be changed, and then the file or folder must be flagged for auditing. From that point, items will appear in the Event Viewer. How the file or folder is accessed is also subject to auditing, and must be decided once auditing of the object is enabled. Every type of permission listed earlier in this chapter is available as a type of access, with each type of access capable of being audited if successful or failed. Read more here.
There is another article which explains how to monitor file deletion on a Windows Machine (Server and Client):
This method of logging file system changes using security auditing can be extended with file read, write, change operations.