Using my PC, I downloaded office for mac from my MSDN subscription, and it has been downloaded as an ISO:
How do we transfer this ISO onto a mac-formatted USB so that the mac is able to read this ISO from the USB and install office?
You can copy it to anything - hard disk, USB key, or Flash drive.
It doesn't need to be specifically Mac-formatted [HFS+]
If the file is larger than 2GB, then ExFAT would be the best format for the drive, regular FAT32 cannot handle large files. NTFS can be read on Macs, but not written, which may cause issues [though it shouldn't in this case.]
A Mac can open an .ISO directly without needing to 'burn it' as any kind of disk format.
Use Disk Utility [in /Applications/Utilities/] then File menu > Open Disk Image... & select the .ISO file. It will mount to the desktop like a regular mounted disk.