Dragon Naturally Speaking 12.5 cannot detect an audio device after upgrade to Parallels Desktop 9 or to Parallels Desktop 10.
Parallels Audio Adapter driver has been improved since Parallels Desktop version 9.
The microphone driver setting has been changed from 'Line In' to 'Mic-in' microphone setting.
In order to resolve the issue, please change the Recording Device in software settings for your User Profile.
Go to Profile > 'Add dictation source to current User Profile...' and choose 'Microphone plugged into Mic-in jack'.