Symptoms

When using an IPC event, child process is not starting and Viewflow indicates 'Sub-process unavailable' for IPC event.
 

Diagnoses

When using the "Integrated Windows" authentication method for IPC event, it will use the startup service account specified for the K2 blackpearl service as the user attempting to start the IPC Process.

http://help.k2.com/onlinehelp/k2blackpearl/userguide/current/webframe.html_Reference_-_Event_Wizard_-_IPC_Event_Wizard_-_Connections.html
 

Resolution

Adding the K2 Service Account to the child process and granting Start rights resolved the issue.