I looked around Audi/VW user forum.
There’s a class action lawsuit case going on about this matter.
But before going to the court, you’d better contact your Audi dealer first.
Is your car still under manufacturer’s original warranty-4 year and 50,000 miles?
Then it would be easy.

* If it is, you can just go to the dealer shop and ask them to diagnose if it is well-known
oil sludge problem. They will replace your engine for free.

*If your mileage is between 50,000-80,000 miles, you can ask them for extended warranty.
But in this case, you have to provide all your oil change service receipts.Then the dealer will replace the engine and Audi will pay all expense.

*If you don’t have all receipts or your mileage is over 80,000 miles,
this is the worst case. You have to get repair with your own expense going up to $10,000.

And..please don’t drive with oil lights on, It can damage your engine and eventually blow it.

Here are some articles about this problem

http://www.consumeraffairs.com/automotive/audi_sludge.html
http://www.audiworld.com/news/04/083104b/content.shtml

I’ll look further to get more information and post here.