We address the problem of identifying and isolating misbehaving nodes that refuse to forward packets in multi-hop ad hoc networks. We develop a comprehensive system called Audit-based Misbehavior Detection (AMD) that effectively and efficiently isolates both continuous and selective packet droppers. The AMD system integrates reputation management, trustworthy route discovery, and identification of misbehaving nodes based on behavioral audits. Compared to previous methods, AMD evaluates node behavior on a per-packet basis, without employing energy-expensive overhearing techniques or intensive acknowledgment schemes. Moreover, AMD can detect selective dropping attacks even if end-to-end traffic is encrypted and can be applied to multi-channel networks or networks consisting of nodes with directional antennas. We show via simulations that AMD successfully avoids misbehaving nodes, even when a large portion of the network refuses to forward packets.