2003 Audi A4 smell when AC is turned on

This is definately a common problem on a BUNCH of Audi models. Matter of fact, the problem is so common, Audi made a TSB on it.
Unpleasant "musty" odor from Heating and Ventilation system. Odor mainly occurs after vehicle has been sitting unused at least 5 hours and within 20 to 60 seconds after vehicle is first started.
Technical Background
Condensate is a normal condition in all A/C systems. If odor is noticeable without engine started, this may be due to mold and mildew in the passenger compartment, not from the A/C system. All other possible sources of unpleasant odor must be addressed before performing this Technical Service Bulletin. Consider the following conditions before proceeding:

Evaporator housing drain must be open and free of debris.

Cabin must be sealed with no water ingress into the passenger compartment.

Plenum drains must be clear and free of debris.

Pollen filter must be clean and free of moisture.
Contaminants are effectively neutralized using the Aircomatic(R) II Ultrasonic Climate System Cleaner (VAS 6189A) and Airco-Clean(R) Ultrasonic Air Conditioning Treatment (VAS 6189/1). All other cleaning methods are no longer permitted.
Production Solution
Not applicable.
Service
1.
If the vehicle is equipped with a pollen filter that is located inside the cabin such as in the A3, A6 and Audi Q7 then the pollen filter element will need to be removed and its cover reinstalled before performing this procedure.
2.
Start engine.
3.
Set climate control temperature to its lowest setting. Set fan speed to its lowest setting. Set airflow direction to the dash vents only. Activate recirculation and ECON modes.
4.
Thoroughly shake a 100ml bottle of treatment and empty the bottle into the filling chamber
5.
Connect the outlet tube.
6.
Place the cleaning unit into the passenger footwell, making certain that the unit is as level as possible. Connect the power cord and route it through a slightly opened window. The remaining windows and sunroof should be completely closed.
7.
Switch unit on and position the outlet tube such that the vapor is drawn into the recirculation air intake, generally in the passenger footwell area. Refer to the appropriate repair information for exact location. Close all doors. The atomized cleaning fluid will begin coming out of the vents. After about 15-20 minutes, the treatment stops automatically.
8.
If the vehicle is an Audi Q7 with 4 zone climate control, the rear A/C unit is to be treated as well. Repeat the procedure for the rear A/C unit. Use the same A/C settings as were used for the front A/C unit. Position the outlet tube toward the vent on the left of the rear compartment.
9.
Air out the vehicle after the procedure for about 10 minutes.
10.
Check the Aircomatic  manual for instructions for unit maintenance after each use.
Warranty

This procedure will be allowed only once per vehicle within the first 12 months of service and within the New Vehicle Limited Warranty.

There must be an original customer complaint of the specified odor symptom on the repair order for this Technical Service Bulletin to apply. Adding on this procedure is not permitted.

Subsequent applications, should they become necessary, will be the customer's responsibility.

Replacement of the pollen filter under warranty is not allowed within the performance of this procedure. The pollen filter is covered only where specified at the appropriate maintenance interval.
When procedure applies to vehicles under warranty, use the table.
Required Parts and Tools
Additional Information
All parts and service references provided in this TSB are subject to change and/or removal. Always check with your Parts Department and service manuals for the latest information.