The audio signal is divided into frequency sub-bands, the sub-band samples are quantized according to a predetermined quantizing criterion, and the quantized samples in one or more sub-bands are summed with samples of the auxiliary signal in such sub-bands, the auxiliary signal sample in a sub-band having a maximum amplitude less than half the quantization step used in such sub-band. The combined signal, covering the entire frequency band of the audio signal, can be transmitted or recorded on a record carrier. Upon audio reproduction at a receiver only the audio signal will be audible, the auxiliary signal being masked due to the psychoacoustic characteristics of the human auditory system which are unresponsive to low-level noise in the presence of high amplitude sound. The receiver includes a decoder which analyzes the combined signal into the original frequency sub-bands and re-quantizes the sub-band signals using the same quantizing criterion as at the coder. The auxiliary signal is reconstructed by subtracting the quantized signal sample in each sub-band from the non-quantized signal sample therein and combining the non-quantized sub-band signal sample. The auxiliary signal may be a copy inhibit code which serves to inhibit a recorder from recording the audio signal, thus protecting against unauthorized copying.