No. If you're going to contract "I do not" into "I don't", then you should also contract "it is" to "it's", and contract "what is" to "what's".
Now we're getting closer to natural phrases. But still, they could be improved. Native speakers are less likely to use the word "understand" in such phrases, unless speaking in a stern formal capacity. Here are some examples of phrases more natural in common casual speech, at least in the UK:
"I don't see what's so funny about it."
"I don't get why you think it's so funny."