Final answer:
The statement is true. The CPA may hold supporting records if the fee remains unpaid.
Step-by-step explanation:
The statement is true. Supporting records that are not reflected in the client's records, such as proposed adjusting entries, may be held by the CPA if the fee remains unpaid. This is known as a CPA's right of retention.
When an accounting service has been performed, but the client has not paid the fee, the CPA has the right to retain the supporting documentation or work papers until the fee is paid. This ensures that the CPA's work is protected and the client fulfills their financial obligation.
For example, if a CPA prepares proposed adjusting entries as part of the client's financial statements and the client fails to pay the fee, the CPA can hold onto those proposed adjusting entries until the fee is settled.