Unable to find Audit specification when I try to create Server level audit
We can't troubleshoot pointing and clicking through a GUI, because we don't know exactly what you did or what you might have missed. 

You need to create a server level audit (which is like a container for specific audit definitions) and a server level audit specification (which is the part that dictates the auditing). 

I suggest looking at the documentation for examples using DDL (e.g. CREATE SERVER AUDIT and CREATE SERVER AUDIT SPECIFICATION). This wasn't too hard to work out:

USE master;
GO

CREATE SERVER AUDIT ServerAudit
TO FILE 
(
    FILEPATH = N'C:\temp\',
    MAXSIZE = 0 MB,
    MAX_ROLLOVER_FILES = 2147483647,
    RESERVE_DISK_SPACE = OFF
)
WITH
(   QUEUE_DELAY = 1000,
    ON_FAILURE = CONTINUE,
    AUDIT_GUID = '0da5fd7b-8218-486f-8641-c31465cae657'
);
GO

ALTER SERVER AUDIT [ServerAudit] WITH (STATE = ON);
GO

CREATE SERVER AUDIT SPECIFICATION [AuditPrincipals]
FOR SERVER AUDIT [ServerAudit]
ADD (SERVER_PRINCIPAL_CHANGE_GROUP)
WITH (STATE = ON);
GO


So then I did this:

CREATE LOGIN floob WITH PASSWORD = 'blat', CHECK_POLICY = OFF;


And I saw this in the audit log: