AIB is preparing to block a High Court injunction being sought by its group internal auditor, Mr Eugene McErlean.

The bank will claim the post of internal auditor was awarded for a five-year period and that Mr McErlean's term of office was due to end this year. He assumed this role in 1997.

Mr McErlean (43) is reported to be claiming that AIB's decision to remove him was without basis. Mr McErlean contends it was a disciplinary sanction taken without any complaint or charge against him.

It breached the bank's internal procedures and the principles of natural justice, according to the terms of his legal action.

He has been absent from work since March, at which time the AIB group's chief executive, Mr Michael Buckley, announced the bank would be recruiting an external candidate who would take over Mr McErlean's position as internal auditor.

This announcement was made as the bank issued the report into the $691 million (€750 million) fraud at AIB's US subsidiary, Allfirst. The report, by Mr Eugene Ludwig, stated that the fraud had been perpetrated over five years and blamed lax management and weak controls for allowing it to happen.

The internal audit function did not have any remit over Allfirst.

The bank is also seeking to hire a new firm of accountants to take over its external audit function following the fraud.

The outgoing auditors, PricewaterhouseCoopers, will not tender for the contract.

Mr McErlean's action is at a preliminary stage and he has put the bank on notice of his intention to pursue this action if it seeks to move him to another post.

He has been with AIB since 1991. He joined the bank in Northern Ireland working at First Trust. Mr McErlean is seeking to retain his position as internal auditor and he is also seeking damages for defamation, stigma, conspiracy, intimidation and breach of contract and general damages.

He is seeking to ensure that AIB will be required to fund his pension, life assurance and death-in-service benefit and to preserve his bonus and remuneration.