Setting Audio Input node for AVAudioEngine causes outside audio to stop

I'm building an app that will allow users to record voice notes. The functionality of all that is working great; I'm trying to now implement changes to the AudioSession to manage possible audio streams from other apps. I want it so that if there is audio playing from a different app, and the user opens my app; the audio keep playing. When we start recording, any third party app audio should stop, and can then can resume again when we stop recording.

This is my main audio setup code:

private var audioEngine: AVAudioEngine!
private var inputNode: AVAudioInputNode!

func setupAudioEngine() {
    audioEngine = AVAudioEngine()
    inputNode = audioEngine.inputNode
    audioPlayerNode = AVAudioPlayerNode()
    audioEngine.attach(audioPlayerNode)

    let format = AVAudioFormat(standardFormatWithSampleRate: AUDIO_SESSION_SAMPLE_RATE, channels: 1)
    audioEngine.connect(audioPlayerNode, to: audioEngine.mainMixerNode, format: format)
}

private func setupAudioSession() {
    let audioSession = AVAudioSession.sharedInstance()
    do {
        try audioSession.setCategory(.playAndRecord, mode: .default, options: [.defaultToSpeaker, .allowBluetooth])
        try audioSession.setPreferredSampleRate(AUDIO_SESSION_SAMPLE_RATE)
        try audioSession.setPreferredIOBufferDuration(0.005) // 5ms buffer for lower latency
        try audioSession.setActive(true)
        
        // Add observers
        setupInterruptionObserver()
    } catch {
        audioErrorMessage = "Failed to set up audio session: \(error)"
    }
}

This is all called upon app startup so we're ready to record whenever the user presses the record button.

However, currently when this happens, any outside audio stops playing.

I isolated the issue to this line: inputNode = audioEngine.inputNode

When that's commented out, the audio will play -- but I obviously need this for recording functionality.

Is this a bug? Expected behavior?