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A coding algorithm for lossless compression of audio signals is presented. The proposed algorithm consists of a lossy coding part and a lossless coding part. The lossy coding part is based on code excitation approach where the excitation gain and the short-term prediction coefficients are adapted in a sample-by-sample fashion to cope with rapid time-varying nature of audio signals. The error between the input and the code-excited synthetic signal is then encoded by an arithmetic coder to achieve lossless compression. The excitation codebook is searched by using an M-L tree search strategy with minimum error energy and minimum code length after arithmetic coding as search criteria. The proposed coder has very low decoding complexity due to its simple code excitation structure and achieves compression performance comparable to other advanced lossless coders for coding CD quality audio.