AO should be multiplied over the ambient light pass or the direct diffuse if you don't have an ambient pass. see the screenshot below. It's a simplified version of the composite of the house I did recently. If you're interested it's volume 5
The AO is multiplied over the direct diffuse this is then added into the start of the node chain. there are many ways of doing this some more correct than others the thing you want to avoid is multiplying the AO over the entire image or bringing in a multiplication operation anywhere in the main node chain.
Good luck 
David
From a readers' Q and A column in TV GUIDE: "If we get involved in a nuclear war, would the electromagnetic pulses from exploding bombs damage my videotapes?"