Audio data compression is used to reduce the transmission bandwidth and storage requirements of audio data. It is the second stage in the audio mastering process with audio equalization being the first stage. Compression algorithms such as BSAC, MP3 and AAC are used as standards in this paper. The challenge faced in audio compression is compressing the signal at low bit rates. The previous algorithms which work well at low bit rates cannot be dominant at higher bit rates and vice-versa. This paper proposes an altered form of vector quantization algorithm which produces a scalable bit stream which has a number of fine layers of audio fidelity. This modified form of the vector quantization algorithm is used to generate a perceptually audio coder which is scalable and uses the quantization and encoding stages which are responsible for the psychoacoustic and arithmetical terminations that are actually detached as practically all the data detached during the prediction phases at the encoder side is supplemented towards the audio signal at decoder stage. Therefore, clearly the quantization phase which is modified to produce a bit stream which is scalable. This modified algorithm works well at both lower and higher bit rates. Subjective evaluations were done by audio professionals using the MUSHRA test and the mean normalized scores at various bit rates was noted and compared with the previous algorithms.