Embodiments are directed to a companding method and system for reducing coding noise in an audio codec. A method of processing an audio signal includes the following operations. A system receives an audio signal. The system determines that a first frame of the audio signal includes a sparse transient signal. The system determines that a second frame of the audio signal includes a dense transient signal. The system compresses/expands (compands) the audio signal using a companding rule that applies a first companding exponent to the first frame of the audio signal and applies a second companding exponent to the second frame of the audio signal, each companding exponent being used to derive a respective degree of dynamic range compression and expansion for a corresponding frame. The system then provides the companded audio signal to a downstream device.