Posted By CJP
A combination of honesty and diplomacy. Have in the back of you mind that if something goes wrong and you were remiss at not highlighting a potential problem you might feel partially to blame (your boss might think so too!).
If the inspection report goes to management start with a brief summary and a list of recommendations. The body of the report should elaborate on the findings, giving the justifications for the recommendations. You could also include the inspection checklists (if that is what you used) as an Annex to the report.
Try for balance - give some praise where it is due (positive things seen)but not so much that it distracts from the improvements you are highlighting with your recommendations.