Have Transmission Questions? Ask a Mechanic for Answers ASAP
I would start by checking the connectors on the front of the transmission, to see if they are weeping transmission fluid through the pins and shorting the circuits.
Have you checked the transmission control module, under the passenger carpet? Roll the seat back, remove the side trim, and lift the carpet enough to get your arm under there, slide the black plastic box forward and pull it out from under the carpet (wiring is long enough)
It's possible, especially if you say you have water getting in
There's no way to know for sure without scanning the transmission control module for faults. The EPC light will illuminage anytime there is an issue that deals with power transfer, whether it is torque delivery from the engine relating to the throttle body, or a transmission issue with power delivery to the wheels.
You need a scan tool that can access the module- SNap-On or other professional reader, factory tool, or Ross-Tech VAG-COM software and connector.
You need to be able to access the transmission control module. Most "generic" scan tools like they have at the auto parts store will only read the engine control module.
what fluid did you use for the transmission, and how did you check the fluid level?
VAG-COM can be bought through the Ross-Tech site. It is a couple hundred bucks, but comes with the connector cable, and full customer support, and works on any Audi and VW product. They have a shareware version as well but you would need to source your own cable, and they don't offer customer support. They have their own forum on VWVortex as well.
Were you having these issues before changing the fluid? And I don't understand what you mean by ATF IV. What brand and type of ATF is it?
Looking into some bulletins, it looks like the valve body is the issue. There is a sticking valve inside that regulates the pressure for those upshifts and it is a failure point. One some they failed at less than 10k miles.
What makes you think it is a transmission speed sensor fault? Your faults are for for each of the shift points, that the gear monitoring is saying it should be in one gear when it is in another.
I am thinking it is the valve body, because on this vehicle with this transmission it was a common issue.
If it were seeing a spec from the transmission speed sensor that was out of range or "implausible" it would set a fault.
There are two transmission speed sensors- one registers the input speed, and one the output speed. They are both located above the valve body, so you would need to drop the pan and remove the valve body to expose them. Again, especially since there are two, if one of them is reading different from the other, it will set a fault.
I have already told you that I believe the problem to be in the valve body, and that those sensors are NOT the problem, as they would throw a fault if they were not in alignment with one another.