When a custom audio alarm is set by the evolution calendar function, it is stored in the calendar.ics file in a VALARM entry as an ATTACH line. The entry is entered as a file:// url. RFC 2445 defines the contents of an .ics calendar file and specifies that ATTACH lines must contain URI's or other particular entries, so this entry is correct. A simple filename would not conform to the standard.
The evolution-alarm-notify daemon treats this entry as a simple filename, and since "file:///filepath/filename" is not a filename it never exists. Since the filename doesn't exist alarm-notify uses the gnome beep function to create an audio alert rather than the sound.
Suggested resolution, at a minimum, evolution-alarm-notify could check for the existence of "file://" at the beginning of the entry and, if present, strip it before the filename check and subsequent passing of it as an argument to the gnome_sound_play function, which also takes a filename rather than an URI. This processing is done in evolution-2.12.0/calendar/gui/alarm-notify/alarm-queue.c function audio-notification.
To confirm, set a custom audio alarm. Kill the alarm-notify process. Manually edit the ATTACH line to contain the simple filename. Restart the alarm-notify process. The custom alarm sound should play at the appropriate time.
Circumvention
Use the "run a program" alarm option to run a program such as aplay with the sound filename as an argument. You will have to authorize the aplay program the first time it runs, but can then check the box to allow it run subsequently without interruption.
The gui doesn't seem to remember the sound selected the next time the alarm sound dialog box is opened. One might speculate that initialization of this dialog box might expect a filename rather than a gui in the calendar.ics file, but I haven't checked this wild guess.
Thank you for your bug. What version of Ubuntu do you use? How do you select the sound to use?