Symptoms
SmartObjectServiceFunctions - Authentication Failed: The target principal name is incorrect
Diagnoses
When you receive an error when trying to Create CRM Entity Item within K2 Studio.
As a a result you are unable to connect to the CRM Server despite being able to use the Smart Object Tester to create records using the relevant Smart Object.
Resolution
You can resolve this issue by refreshing the 'SmartobjectServicefuction' service instance and service object. After this you should be able to drag in the event to any activity within studio.