When I create an application folder from IIS, then click on "Test Settings", the Authorization fails. Do you know why?

I'm using Windows Authentication because I need to pull information about the user's profile in Active Directory.

The specific message that displays is when I convert a folder to an application is:

The server is configured to use pass-through authentication with a built-in account to access the specified physical path. However, IIS Manager cannot verify whether the built-in account has access. Make sure that the application pool identity has Read access to the physical path. If this server is joined to a domain, and the application pool identity is NetworkService or LocalSystem, verify that <computer_name>$ has Read access to the physical path. Then test these settings again.

I then added a virtual account for the application pool to the application folder's permissions (via iis apppool[name of application pool].

Application Pool's virtual account

Adding the virtual account resolved the Windows Security prompt that was displaying, but it didn't resolve the Authorization message I keep seeing when I convert the folder to an application folder. This isn't causing any further issues, but I would still like to know why I keep seeing that authorization error when testing the settings.

Other things I've tried: I added the accounts IUSR and IIS_IUSRS to the folder's permissions. From the Server Manager, I installed all components for Application Development.

I'm using Windows 2022.

Any ideas?

As mentioned the the document here it is just warning you can ignore this warning and it will be tested at runtime. as Lex li said you do not need to take any action until and unless you are getting error or issue while running the application.

If you really want to avoid this warning add the admin user accunt to the iis app pool identity.