What are the fundamental issues surrounding capitalization vs expensing?
What approach does management seem to prefer and why?
Which approach do you think auditors seem to prefer?

It's not really a matter of preference, but rather, the nature of the
expenditure.  If a purchase for an asset has a useful life (generally
years), it is typically capitalized.  Examples would include
computers, vehicles, leasehold improvements, equipment, and the like.

This is not a hard and fast rule, but most companies will have a
capitalization policy that says if an asset is over $xxxx, then it is
too small to capitalized.  Let's say you purchased a $100 calculator
and you'll probably use it for the next few years (possibly more). 
However, most companies would choose to expense it, rather than to
record $3 worth of depreciation expense each month.  A general rule of
thumb for determining a capitalization policy is $500 to $1000.  In
larger companies, probably more, in smaller companies possibly less. 
Again, no hard and fast rule.