Heart sounds can be utilised more efficiently by medical doctors when they are displayed visually, rather than through a conventional stethoscope. A system whereby a digital stethoscope interfaces directly to a PC will be described along with signal processing algorithms adopted. The sensor is based on a noise cancellation microphone, with a 450Hz bandwidth and is sampled at 2250 samples per second with 12-bit resolution. Further to this, we discuss for comparison a piezo-based sensor with a 1kHz bandwidth. A major problem is that the recording of the heart sound into these devices is subject to unwanted background noise, which can override the heart sound and results in a poor visual representation. This noise originates from various sources such as skin contact with the stethoscope diaphragm, lung sounds (patient breathing), and other surrounding sounds such as speech. Furthermore we demonstrate a solution using ‘wavelet denoising.’ The wavelet transform is used because of the similarity between the shape of wavelets and the time-domain shape of a heartbeat sound. Thus coding of the waveform into the wavelet domain is achieved with relatively few wavelet coefficients, in contrast to the many Fourier components that would result from conventional decomposition. We show that the background noise can be dramatically reduced by a thresholding operation in the wavelet domain. The principle is that the background noise codes into many small broadband wavelet coefficients that can be removed without significant degradation of the signal of interest. Also explored is the use of a phase space representation of the heart sound to exploit different properties of the signal.