Microphone problem with skype

Hello,

My friend is trying to use skype but her microphone is not working. She purchased a Microsoft LifeCam HD-500 which has a microphone instaled into it. She tested it and the microphone in the webcam does work. However when she tries to make a video call with me I am only able to see her but am not able to hear her. She tried going to Tools>Options>Audio Settting but when she goes to switch the microphone to the one in her webcam it doesn't come up as an option. The only microphone option that is there is called "SigmaTel Audio". If anyone knows how to get the webcam microphone to appear as an option it would be very helpful.