Do you have windows 10? Windows 10 has some privacy settings that allow you to disable app access to microphone and other stuff. Check there and see if maybe Windows 10 is blocking the software from recording sound, for example pic related.
Not certain if Windows is treating it like a microphone even though it isn't one but it's possible. Try compatibility mode also and select the software to run as if it was on XP if you're on 10.