Test Connection failes with an authorization warning

The problem

When you create a new website in IIS 7 and choose to "Test Settings", or when you do this on an existing website, you are prompted with an error. And this happens without you doing anything wrong, you just accepts the default values. The error is:

Cannot verify access to path

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 \$ has Read access to the physical path. Then test these settings again.

The explanation

You see this error message (actually it is a warning message) because you have choosen to use pass-through authentication. In this situation, the application pool is run under a low-privileged built-in account, usally Network Service, or ApplicationPoolIdentity. IIS cannot verify that the built-in account has proper settings, this can only be done at run-time.
In addition to this, the "Test Settings" process does not know which user you have authenticated as. So basically, you need to verify that the application pool identity has read access to the files and configuration files. You also need to make sure that the application identity has proper security settings.
So in most situations, you can safely ignore the warning message, because on a default setup, all the permission settings are correct.


Solution:
1- Open IIS 7.0
2- Select Default Web Site and Right-Click on it
3- Select Add Application... or Add Virtual Directory...
4- Select Contact as..
5- Change Path credentials: from Application user (pass-through authentication) to Specific user:
6- Add a Admin User with password like COMPUETRNAME\Administrator User

Additional information

If you set up the application pool to use a custom identity, you will not see this warning message. But, do not do this with the purpose of getting rid of the warning, since the warning may not mean anything to you.




source: http://www.it-notebook.org/iis/article/test_connection_authorization_failed.htm
http://amastaneh.blogspot.ca/2011/04/authorization-cannot-verify-access-to.html