A method and system for mitigating and compensating for loss of digital audio data transmitted as a stream of packets to a client (30). A server (10) compresses digital audio data corresponding to a digitized analog audio signal. The compressed data are divided into N frames of data per packet. The server interleaves the frames, producing interleave packets of up to order N. The interleave operation minimizes the effect of any lost packet when the interleave packets are received, deinterleaved, and converted to an analog signal that is played on a speaker at the client. Lost frames are replaced using the data from frames that are received. As a further aspect, the frames can be scrambled at the server by applying a permutation function F that depends upon the packet number (PN) and a Key value. At the client, an inverse permutation function F.sup.-1 is applied to unscramble the frames.