The invention is a stereo sound expander which reproduces a realistic sound image in three dimensions. Prior art systems suffered from the disadvantage that the creation of virtual sound sources or loudspeakers gave rise to a tonal change. Attempts to correct the tonal change impaired the accuracy of the virtual sound source. The invention overcomes the problems experienced by prior art systems, by coupling modified and unmodified stereo signals. Thus by not modifying a Head Related Transfer Function (HRTF) for one signal and equalising the HRTF for the other signal, a flattened frequency response is produced with no tonal changes, but with a high degree of spatial accuracy. Resultant output signals may be used to generate binaural signals or can be fed into crosstalk cancellers.