I have previously discussed the use of captured ships and submarines against their former owners on a couple of occasions. This answer focuses on U-570, captured by the British in 1941 and brought into service as HMS Graph, making several war patrols (the Germans also captured a British submarine, Seal, though due to a lack of torpedoes compatible with British tubes, only used her as a training sub). This answer, meanwhile, covers the use of captured ships by the Japanese. In this answer, though, I'll cover the use of captured merchant ships (partly discussed in the second linked answer).

At the start of WWII, the Royal Navy captured a large number of German merchant ships. These ships were at sea, or in British and Allied ports, when hostilities began. Several more were captured as they tried to run the Allied blockade of Germany. These ships were joined by Italian prizes from July 1940. Most of these ships were brought into service in the British merchant navy; the faster or larger ships, though, were used by the Royal Navy. All these captured ships were given two-word names, starting with 'Empire' (the same naming scheme was used for war production to standard designs). In Royal Navy service, the ships were used as hospital ships, auxiliaries, and ocean boarding vessels. Ocean boarding vessels were ships used to enforce the blockade of Germany, stopping and inspecting suspect merchant ships in the waters around the UK. One such ship was the German banana boat Hannover. She had been captured in the Caribbean in March 1940, by HMS Dunedin and HMCS Assiniboine, and brought into British service as Empire Audacity.

Empire Audacity would, however, see little service under that name, or as an ocean boarding ship. The RN was facing a serious problem protecting convoys in the eastern Atlantic. This was especially pronounced for those close to Occupied France, such as convoys on the route to Gibraltar. German Fw 200 'Condor' patrol aircraft could easily harass these convoys, bombing ships and vectoring in U-boats to attack. There were a number of stop-gap solutions, mostly focused on ships carrying single-use fighters that could be catapulted off to drive off a shadowing aircraft before having to ditch. None of these were especially successful, given their wasteful use of precious aircraft. The only real way to prevent the attacks was to provide the convoys with a carrier escort. Unfortunately, the RN didn't have enough carriers to protect every convoy, as most of its carrier fleet was needed to counter the German and Italian fleets. In Autumn 1940, though, Captain Matthew Slattery suggested adding the simplest possible flight deck (including arrester wires) to merchant hulls. This would allow the ships to recover their fighters after launching them. The RN was supportive of the concept, but ran into problems. The Ministry of War Transport, responsible for merchant shipping, didn't want to release precious merchant hulls for the conversion. As a result, Empire Audacity, already under the RN's control, was chosen for conversion.

The conversion was dramatic. Empire Audacity's bridge and superstructure were razed, as were her funnel and masts. A lightweight flight deck was added. To simplify the conversion, she was given neither lifts nor hangar, meaning her aircraft had to be maintained on deck. Her engine exhaust was redirected through new trunking out over her starboard side. She would not be given an island like larger carriers. Instead, she was given two platforms, one on either side, ~4ft below the flight deck, from which the ship was steered and controlled. The platforms were linked by a passage running under the flight deck, but the view from each platform was limited. She had a small mast for signalling, and to carry her air warning radar. She was given a small air group, of six Grumman Martlet (F4F Wildcat in US service), arrayed in a 'herringbone' pattern deck park aft. This gave just enough space to launch an aircraft, though it was somewhat precarious.

The conversion was completed in June 1941, with Empire Audacity entering service as an 'auxiliary aircraft carrier'. This combination led to a degree of confusion; 'Empire' was a prefix used for merchant ships and 'auxiliaries' were not fighting ships, leading commanders to underestimate her value. Her name was soon cut down to just Audacity, and referring to her as an 'escort carrier', the first of the type. On the 13th September, she made her first operational sortie, protecting convoy OG74 to Gibraltar. Her fighters claimed an FW 200, and sighted a U-boat. She returned from Gibraltar with the unopposed convoy HG74. On the 29th October, she sailed again for Gibraltar, escorting OG76. The Martlets made their mark again, shooting down two Condors and forcing away a third.

The returning convoy, HG76, set off on the 14th December 1941. Over the next six days, the convoy found itself facing a strong U-boat concentration. The escorts, under the command of star RN escort commander Captain J.F. ‘Johnny’ Walker, met this threat well. One of Audacity's escorts made the first kill, sinking U-127 on the 15th December. The next day, Fw 200s encountered the convoy, vectoring in three U-boats before they were driven off. One of these U-boats, U-131, was attacked by Audacity's fighters. One Martlet was shot down, but the boat was heavily damaged, forcing her captain to scuttle her as British escorts arrived. Two more Condors were shot down by Martlets on the 18th. At the same time, the surface ships were sinking another U-boat. On the 20th, U-754 sank HMS Stanley, but was itself sunk by Walker's flagship. During this time, the Martlets engaged two more Condors, driving them away from the convoy. The next night, though, Audacity's captain chose to take up a steaming position outside the convoy. This choice was likely driven by the lack of visibility from Audacity's conning platforms, which made it dangerous to try and steam within a zig-zagging convoy at night. Unprotected by the escort, she was an easy target. U-751 scored a torpedo hit on her stern which flooded her engine room, stopping her. She was an easy target for the next two torpedoes, and she sank at 22:10 on the 21st December. While Audacity had a brief career, she was highly successful. During her time with OG76, her fighters had shot down two Fw 200s, and damaged or forced off six more, as well as sighting and assisting in the sinking of a total of eight submarines. Her successes led to the construction of many more escort carriers, though no more were converted from captured German ships.