Unfortunately, setting the "Shutter Sound" to "OFF" will not mute the shutter sound when using flash.
Apple does not allow developers to silence the flash on its iOS devices, but there are two options that still provide a solution.
1) You can silence the shutter/flash by exiting Microsoft Pix and lowering the device volume, or,
2) You can also activate the Mute switch on the upper left edge of the device.
Both alternatives will silence the shutter when using flash on Microsoft Pix.