Please check to make sure the iCamSource window isn't hidden. If it is, there will be a small iCamSource icon in the Menubar (top left corner of your screen). The icon is a small version of the iCam icon (camera lens). From this icon, you can stop, start, or quit iCamSource.
Regarding the audio, please make sure your iPhone isn't in silent/vibrate mode. I know it sounds simple, but it's the most common reason for audio problems.
What entries show up in the Audio drop down list in iCamSource? What entry are you selecting?
When you're zoomed into the camera in iCam on your iPhone, try changing the volume using the iPhone volume buttons. Does it say "ringer" in the volume indicator pop-up?