So I recently upgraded my iPhone from 4.2 to 5.0.1 and things seemed great, that was until I started on a new audiobook (I often listen to audiobooks during my 1hour commute to work)….  I quickly discovered that as of IOS5 the autdioplayer no longer was able to remember the position (where I left off) and this is NOT very practical with audiobooks (some up to 42 hours long), now I often re-compress my audiobooks and thought that I may have made an error somehow – but after re-compressing and searching the net I quickly realized that indeed the audiobook function was truly broken and many others had the same issue.

Strange that Apple has not fixed it yet as it seem to be a well known issue since IOS 5, the only reason I can see is that Apple want’s to FORCE you even deeper into using iTunes (as I will move to explain with the workaround). 

Workaround
So how to work around this problem, well yes you need that dreaded iTunes 🙁  (horrible horrible program).  I used to start iTunes and just drag my .m4b files straight to my iPhone and viola everything worked like a charm, well with IOS5+ you need to make a short detour, you need to drag your audiobook to the iTunes library and THEN to the device (from the library) – why? well because Steve Jobs say so, no I don’t know – but it seem that this will circumvent the bug in IOS5 and allow resume on the files transferred in this manner – if you just drag them straight to the device resume will not work (it may to some extend, but if you launch any other sound file or restart your phone etc. it will restart your audiobook).

Others say that installing the “Audible” app can also help (you can use it without being a member), but I have not had the time to fully confirm this – it is plausible never the less.

Diagram below;

Only thing left to say is; Apple !”#%&!”%¤#& god da.. fix this

Source; https://discussions.apple.com/thread/3378886?start=15&tstart=0