Test subject: iPhone 4 (MC605X/A) – 32GB Black (unlocked) with iOS 7.1.1
Symptoms: When playing audiobooks the sound disappears and volume control is no longer available (the volume on the apps is grayed out). On further inspection the iOS interface has swapped the headphone audio output to dock connector.
Solution: Disconnect the earphones, (The audiobook will stop), and then whitout the Earphones press play again. If this doesn’t work and you have Air-Play available – connect to the Air-Play device, modify the volume and then change back to the headphones.
Why?: This appears to be a common/known issue and is definitely an iOS software issue, it appears to be a hardware issue as you are using the hardware to toggle the software settings. The discussion regarding cleaning the dock connector area with alcohol may solve other related issues but the dock connector problems are not existing with the same phones with iOS 6 suggesting a red herring.