1. Go to Academics > Grades > grades management > Enter grades by student  > Search Student > View > Grades & Credits - Transfer > View >  Add Transfer Course (perhaps include "audit" in the title)
2. Select the appropriate Grade Category that includes an AUD grade from the Grade Category dropdown as that will give the grade translation dropdown from which to select the AUD grade
3. Enter the Course title (note that since it is not being included in the gpa, an equivalent course is not necessary)
4. Enter the abbreviation, if desired, for display on the transcript instead of the course title
5. Select the appropriate Transcript Category
6. Select 'Do not include' from the GPA dropdown
7. Add the desired grade from the grade dropdown - in this case it would be AUD 
8. Enter the desired credits if they are awarded credit for auditing (unlikely, but they have that option); otherwise enter 0 in the attempted and earned fields
9. Save