Vibration analysis is widely used in machinery diagnostics and the wavelet transform has also been implemented in many applications in the condition monitoring of machinery. In contrast to previous applications, this paper examines whether acoustic signal can be used effectively along vibration signal to detect the various local faults in gearboxes using the wavelet transform. Two commonly encountered local faults, tooth breakage and tooth crack, were simulated. The results from acoustic signals were compared with vibration signals. The results suggest that acoustic signals are very affective for the early detection of faults and may provide a powerful tool to indicate the various types of progressing faults in gearboxes.