It took me a while to find where this setting is located, so I thought I would share with the community where to find it. First, make sure that you’ve got the timeline selected, then go to Sequence –> Sequence Settings, towards the top of the dialogue box that opens is a button labeled “Playback Settings” – click that. From there, you’ll see a section titled “Realtime Playback” and within that are two radio buttons – “Desktop Audio” and “External Device Audio”. Clicking the “External Device Audio” button fixes the problem.
Note: I am using Adobe Premiere Pro version 5.5.2