It will cause previously recorded clips to be exported in a most compatible format. To get the most compatible format for future clips you would go to Settings/Camera/formats and uncheck high efficiency and check maximum capability.
I wasn't clear about what you said re importing directly from the Photos library. To import into iMovie from the Photos library you designate the Photos library as the system photo library in the Photos General preferences. Then you click on the Photos item in the iMovie media sidebar of a project. That will reveal your photos and videos in the media browser, from where you can drag them into your project. If that's what you did, then it should work.
If still no success, try importing from the Photos library to your desktop. Confirm that they play O.K. there with QuickTimePlayer. If O.K, then convert one of the clips to Mp4/AAC with the free download, Handbrake. Do that even if the codec already is indicated to be Mp4/AAC. Re-rendering often cures the issue.
You can get Handbrake here:
https://handbrake.fr/
A simple way to do it is to open Handbrake and do a File/Open Source. Navigate to your video and choose it as the source from the resulting screen. Then do File/Start Encoding. Wait a couple of minutes for the conversion to complete. Then save and import the converted clip into iMovie. See if you get both audio and video.
-- Rich