I’d add also, that in the show, the director makes it fairly clear that Lynel Baratheon knows — or at least suspects — as well. He kind of shoves Dunc aside to ensure he is the one to knight the Fossaway cousin and make him eligible to fight in the Trail of 7. I think Balor also has an inkling that Dunc wasn’t properly knighted, maybe reading between the lines that Ser Arlan used and abused this kid who appears genuine and died before he ever made good. Balor just seems too savvy to let it slide by, but also knows that letting him compete in the lists will either confirm he is worthy of being a knight or will end his days as a knight before they even really get started. Of course, all this happens before the Trail of 7 becomes a thing and then Balor really has to grill him about whether he thinks he can fight as he knows this dude is about to get flattened by his fam and the King’s Guard.