Yes, you need the flash utility to install the latest BIOS. But first, try to see whether onboard audio is enabled in BIOS first, before trying the updates. Flashing the BIOS is a risky task, because if anything wrong happens the mobo might not work at all. I have to warn you of this.
After you've made sure that the onboard audio is enabled in BIOS, and it still does not work, make sure you have the right mobo model and version. If you look at the posts I have placed, you'll notice that there are three versions of the K7SEM mobo. v1.0, v1.0+B1, and v3.0A. You can find out either from the box the mobo came in as well as on the pcb backing of the mobo itself. Once you've made sure, you can try downloading the flash utility as well as the BIOS update, save both files onto a bootable diskette, boot the computer with the diskette and run the flash utility. There will be instructions shown when you run the utility, do backup the current BIOS before you install the new one. Name it as "original.awf" or something similar. Do forgive me if that is the wrong extension, use the same extension as the BIOS update file that you will download from the website.
You'll be doing this at your own risk. Try to get a professional to be there when you do it if you are doing this for the first time.
After doing so, boot it up and uninstall/reinstall the audio drivers.
However, a BIOS flash does not guarantee that you'll get your audio working again. It may be due to a faulty audio chip on your board, since you say that you've installed the lastest drivers already. If this is a new one, go back to the store and have them check it out.
Wish you luck.