While I haven't used it for this particular form, I have used it for similar checklists.
Survey123 would definitely be the way to go I would say. Setting up each question would be straightforward enough, you can even include images in the forms, and any hints or extra details for the extra information on how to answer them. I'd definitely say to use Survey123 Connect to create the form.
If there's a specific template that's required to be officially submitted you can re-create it using the Reports function in Survey123. You can basically make the report look any way you want it to using tables and including images and such (though including images the user attaches can be a bit of a pain, but if you place some in the template they should be fine).
You can even use Power Automate to automatically create and email/upload/whatever the reports when the survey is submitted (or on a given interval). You could even have different actions take place depending on the results of different questions, like if an issue is found have it email a specific person or whatever the best way to get a resolution started is.
If you're looking to summarize data like how many are in compliance or what issues there are you could set up a Dashboard or Experience Builder for sure as well.
