Setting for master data check of father &1 and child &2 is not compatible

What causes this issue?

The setting for the 'Master Data Check' flag for a compounding parent is
not compatible with a compounding child.
If the master data of the parent is not checked at all ('No Master Data
Check/No Reporting'), a child is not allowed to check the master data.
If the master data of the parent is not checked during reporting
('Master Data Check during Reporting'), a child is not allowed to check
the master data during staging.

System Response

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

How to fix this error?

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.