A portable digital ultrasonic monitoring system and method for use by an operator in detecting the ultrasonic waves and temperature variations produced by sources such as leaks in pipes, arcing, electrical corona and machinery defects is provided. The digital ultrasonic monitoring system includes a microprocessor based system in a hand held elongate housing that digitally analyzes and stores information received from its sensors. The digital ultrasonic monitoring system provides a referenced decibel output reading of the signal strength of the received ultrasonic signals. In addition, a heterodyned type audio signal that is related to the sensed ultrasonic signals is provided to the operator through a pair of headphones. The portable device has user input keys that allow the operator to select from a variety of different operating modes. A display displays a variety of different readings depending upon the operating mode of the device.