Create new content type with a user reference
Your user selection/search process may need some custom work to implement the various node-reference modules in the way you've described, but there are several modules that may do what you need out of the box. The References module will be easier to implement while creating new content, but the Relation module may be more agile as you can add fields to your relations, 'user report' for example.

I would be happy to elaborate if you'll clarify your user selection process.



1 - References

This adds a field to an already created content type.  Generally simpler to implement.


  This project provides D7 versions of the 'Node reference' and 'User
  reference' field types, that were part of the CCK package in D6, at
  functional parity with the D6 counterparts. See
  http://drupal.org/node/533222 for details.


Video Series (NodeOne) Using the Reference module

2 - Relation

Rather than being a 'field' on an already created content type this is for all intents and purposes a new content type.  Relations are fieldable as well, so adding the 'report' fields you need will be easy.


  Relation is an API module and storage model for both simple and the
  most complex relations between entities. The module can handle both
  directional and symmetrical relations very well.


Video Series (NodeOne) Learn the Relation Module