This paper presents a method of fault detection and fault localization from acoustic noise measurements. In order to detect the presence of noise sources wavelet transform is applied to acoustic signal. In addition, a cross correlation based method is proposed to calculate the exact location of the noise allowing the user to quickly diagnose and resolve the source of the noise. The fault detection system is implemented using two microphones and a computer system. Experimental results show that the system can detect faults due to artifacts accidentally inserted during the manufacturing process and estimate the location of the fault with approximately 1 cm precision.