I would start by checking your system profiler and verifying that the built in audio is recognized, then go to your system preferences and open the sound app and try to click on the sound files to verify that they either play, or do not. If the sound plays I would suspect that you have a software issue and need to restore the disk, if the sound does not play I would be suspect of a hardware failure If you can, Run techtools and scan hardware /test the audio.
Sounds like a software problem.
Does the Sound Preference Panel open up correctly?
Is the mute function enabled or not? How's the Speaker Icon in the menu bar on the top-right?
Can you boot with an external HD with an another version of your system and check if it works correctly?