““You must register the Kerberos service principal names (SPNs),the
host name,and the fully-qualified domain name (FQDN) for all the new
DNS alias (CNAME) records. If you do not do this,a Kerberos ticket
request for a DNS alias (CNAME) record may fail and return the error
code KDC_ERR_S_SPRINCIPAL_UNKNOWN.”

http://blogs.msdn.com/b/karang/archive/2009/12/12/why-do-we-need-spn-for-file-server-nas-ras-file-share-system-dna-alias-cname.aspx

For follow up I can confirm that the kerberos connection is
established correctly. Thanks for the link as it confirms that only a
CNAME is needed as long as the SPN is created for the sql Cluster
Name.

http://social.msdn.microsoft.com/Forums/en/sqldatabaseengine/thread/fa0a38ef-106a-4521-b4f3-a62c60f89a99

Technically,because sql Server SPNs include an instance name (if you
are using the second-named instance on the same computer),you can
register the DNS host for the cluster as a CNAME alias and avoid the
CNAME issue described in Appendix A,Kerberos configuration known
issues (SharePoint Server 2010). However,if you choose to use CNAMEs,
you have to register an SPN using the DNS (A) record host name for the
CNAME aliases.

http://msdn.microsoft.com/en-us/library/gg502606.aspx