A system and method for detecting a leak in a hose of a hydraulic system having a control valve assembly with first and second work ports in fluid communication with an actuator is disclosed. In one aspect, the method includes estimating a first hydraulic fluid flow rate for fluid flowing from the control valve assembly first work port to the actuator. Another step may be estimating a second hydraulic fluid flow rate for fluid flowing from the actuator to the control valve assembly second work port. In one step, a proportional flow rate difference is calculated between the first and second hydraulic fluid flow rates. Subsequently, a flow error value can be calculated by subtracting the flow rate difference from a predetermined margin value. Where the flow error value integrated over time exceeds a total flow error threshold value, a hydraulic fluid leak signal can be generated.