Yes.  If audio is restored, the counter in the 4060 resets, and the alarm output will cancel when the monostable times out.   The original idea of this circuit was to wake sleepy overnight DJs if they dozed off while a track was playing.

It's easy enough to make it not reset on restoration of audio if that's what you want.   We've used a variant of this circuit to monitor the output from a link receiver, and to play in an emergency mp3 on loss, to maintain continuity of output.