How to avoid inappropriate use of computer?

Our medium sized business allows all users to access the internet. Our Windows 2003 server uses Windows Proxy Server to cache the sites visited by users to speed up access and to reduce costs. Our business management team is concerned about a small number of users are using work time to access inappropriate material on the internet.

What is the best way to find out what sites have been visited and the best way to stop this in the future?

Thanks in advance