Hello Micheal Brown,
To achieve full compliance, every physical core in the host must be licensed, with a minimum requirement of eight core licenses per physical processor and a minimum of sixteen core licenses per physical server. Once all physical cores on a host are properly covered with Datacenter core licenses, that host receives unlimited virtualization rights, allowing you to run an unlimited number of Windows Server OSEs or virtual machines without needing extra core licenses for additional VMs.
For your audit documentation, you only need to inventory the physical CPU and core counts of each host to prove that your core license allocation meets or exceeds the physical core capacity, as the number of deployed VMs on a fully licensed Datacenter host does not increase your core requirement.
If this explanation helps you validate your host licensing before the audit, please accept this answer so other community members can benefit from it as well.
Tracy Le